Comments on Market Skeptics: *****Hyperinflation will begin in China and destro...

stop fighting & start seeing: Value of what you wa...

2010-03-08T13:02:14.707-08:00

stop fighting & start seeing:
Value of what you want to buy (@Wal Mart) will go up => Inflation, Eric wins.
Value of what you own will go down (Home, Dollar etc) => Deflation, Mish wins.
Simple.

I don't think China will resort to dollar sinking ...

2009-11-10T01:59:14.898-08:00

I don't think China will resort to dollar sinking - they aren't entirely stupid. What they are doing is squeezing the competition out. By maintaining a pegged yuan, and by being more hardworking and efficient, they squeeze out other manufacturers (in India, Poland, Romania etc).

It's true that the since a large chunk of their savings are in dollar, their asset (the $) and hence their currency will loose value wrt other national currencies (Euro). Since they do not have some kind of unique product to sell many manufacturers in China will shut shop and layoff workers who will have to be absorbed in the rural hinterland (especially when other nations resort to protectionism).

What prevents the Chinese govt from, now, spending in the rural areas (hospitals, schools, cleaning up the environment, and agriculture by setting up rural-work-schemes) by buying goods from chinese companies and paying in dollar? The dollar is then used by the Chinese companies to employ ex-pat Americans, import goods from America etc..

(What can upset this apple-cart is weather)

i thank waklntonka that i grew up in yhe old ways....

2009-10-31T18:07:28.948-07:00

i thank waklntonka that i grew up in yhe old ways. i learned to live without your fiat currency. every thing, and i mean everything i ever needed to survive i got by hunting, gathering and making myself. i pitty you poor people who are soooo dependent on things like paper currency, electricity autos, the telephone, tv, stores to buy your food,clothing, and your health care system. your economey can collapse today and it will not hurt me one bit. i will still enjoy life and continue in pure happyness and joy for each day that the great spirit lets me share in the great mystory with all of my relations.

The distortions caused by sterilization operations...

2009-10-31T05:16:08.888-07:00

The distortions caused by sterilization operations and stifling policy measures are best seen when comparing China's and the US's economy:

A) US home buyers get tax incentives VS Chinese home buyers get tax penalties
B) US gets artificially low interest rates VS China's artificially high interest rates
C) US's "service economy" VS China's "service-less economy"

The Chinese current trade surplus in dollars doesn’t lead to printing Yuan and the sterilization process is largely overrated if existing at all. China uses this fiat money to buy real assets, mines, commodities, lands and international companies …smart move.
Their “economic attitude” of saving vs spending, cash vs credit, is the healthy game lesson the western world has forgotten mistaking “spending” with “growth”.

And I would add it is not “service economy vs service-less economy” but vs productive economy.

In the US, the overvalued dollar and easy credit environment have caused the service sector to become oversized, artificially raising America's standard of living.

Credit is pure debt which leads to bankruptcy and there is no better example than today’s situation to prove it. It shouldn’t replace the missing “capital” nor being a mean for the new “engineering accountability” where loans get into the credit side of the balance sheets.

This oversized services sector giving the feeling of a high standard of living, is very true. Very much so due to the arrogant thinking that a productive activity is degrading so let it be done by the so called “under developed countries”. In return services activities are regarded as “intellectual” luring to an apparent misleading wealth.
One is producing real wealth, the other a bit of knowledge and a lot of nonsense.

All this is more a question of mentality than anything else.

The standard of living in China has risen in the main cities and will spread over but probably at a lower pace for the coming years.
Inflation in China will follow a normal rate for a developing country, when services will be progressively added to production, norms, quality tests, retirement, social welfare etc…in so raising prices and cost of living.

Before this inflation move get meaningful to threaten western countries, fiat moneys would have disintegrated already, which is going to happen far sooner than one can think of.

"Inflation happens when the money supply is growin...

2009-10-09T19:29:55.102-07:00

"Inflation happens when the money supply is growing faster than the economy, and china's economy has been growing fast."

I find the above statement, from paragraph 3, to be close to meaningless.

Money Supply x Velocity = GDP. If
Money Supply is increasing faster than GDP, then velocity is slowing down, which is hardly a phenomena consistent with inflation.

Considering the velocity equation above, we can see that when we say that an economy is growing, we are pretty much saying that the money supply is growing and nothing more, since velocity pretty much stays flat in the long run. "growth" as an economic concept is therefore close to meaningless as well. Or, more succinctly, there is no unit of measurement for quality of life.

@marianne My statement was that Mugaba managed to ...

2009-09-27T05:20:15.037-07:00

@marianne
My statement was that Mugaba managed to beat deflation, like the government managed to beat deflation in the Weimar republic and the Hungarian hyperinflation and in the Roman empire hyperinflation.
The statement that governments can not beat deflation is clearly wrong given the historic evidence.
Of course, that created a big mess in all instances, but that is not at issue. I do not claim the government can beat deflation and save us from economic collapse, I merely say that they can beat deflation. Period

Mugabe didn't beat inflation, he just allowed peop...

2009-09-27T02:46:40.437-07:00

Mugabe didn't beat inflation, he just allowed people to pay and be paid in US dollars en euro's, something that was forbidden until half a year ago (they used to be conviscated).
So in fact, the currency was changed.
But as long as that lunatic is ruling the country, I don't expect any positive change. He has done his upmost to ruin the country.
Secondly, I think we concentrate too much on China. The Chinese economy is only 1/4 of that of the USA and less than 10% of that of the US, Euro-countries, UK and Japan together. The Chinese export is minus 30/40% at the moment, so they will not be able to pull us out of recession, but they cannot drag us further down either.

I'd say there is no reason to say Mish is arrogant...

2009-09-27T00:49:22.931-07:00

I'd say there is no reason to say Mish is arrogant. But I'd like to hear from a deflationist why Mugabe managed to beat deflation, if they are so convinced there is nothing governments can do about deflation.
All fiat currencies ended worthless after a maximum of 100 years, why is this different?
He should change his argument from they CAN'T do anything about it to they WON'T do anything about it, because they clearly can.

Why do people call Mish arrogant? He is the only o...

2009-09-26T06:33:25.371-07:00

Why do people call Mish arrogant?
He is the only one here that talks sense. Any idea how much fiat money has been destroyed since the beginning of 2008? Not even all the CB's in the world can print up to that. Deflation is the word for the years to come, but since governments are not able to spell that word (they are scared as h.ell for it, because it means the end of manipulating the economy), the best they can do is talk about "negative inflation". As long as the consumer doesn't consume, there is no way back.
And by the way, why would the US citizen, buy too expensive Chinese junk?

http://www.tradingeconomics.com/Economics/Inflatio...

2009-07-26T06:51:31.243-07:00

http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=CNY

While your analysis may be sound for the longer term, it appears to be totally contradicted by short term data. From not long after you wrote this, there has indeed been deflation in China...

I found what I believe is an error in the followin...

2009-07-13T23:23:07.467-07:00

I found what I believe is an error in the following part:
"Chinese citizens' lack of social security, free education, and available consumer credit, which has forced them to save far more than their Western counterparts, leaving them with less disposable income."
As government is inherently more inefficient (they require the threat of force to sell their products), westerners have less spending power left after social security.
In this video it is show that Americans cough up 200k$ per welfare recipient. That means a 5% efficiency.
http://www.youtube.com/watch?v=gwTDKt_k9kQ
There is no such thing as 'free healthcare', just healthcare you pay for through voluntary organisations (which have to keep inefficiencies low due to competition) and involuntary ones (who do not care about inefficiencies because they can use coercion). As a result Chinese have to set a side less money for these services and have more left over to spend on other stuff.

Anon, ... "...To call us his "blind site followers...

2009-07-12T03:15:25.225-07:00

Anon,
...
"...To call us his "blind site followers"" demonstrates your ignorance..."

You give answer on this question by yourself:

"...As a previous inflationist I initially followed Peter Shiff..."

I really do not mind if you or ANYBODY "follow" someone.
Personally, I do not like to "follow" anybody, but I try to inform myself.
Of course - you can and should have right to do what you like.
Actually I am glad that you earn money based on the "prophets prediction"...

On the other side - I understand now some facts.
Facts:
1. Mish is extremely arrogant man.
It would be a problem, even if he HAS right...
BUT he is obviously very WRONG...
2. "The prophets" prediction just STOPPED by "deflation". He has NO idea or logical explanation - what will be the continuation...
It is simple as 1D analyze.
You catch just ONE trend but NOT completely phenomena. Even worse! 1D thinking disallowing you to understand complete 3D (REAL!) event... That is the reason that Mish "the Prophet" simply can not see anything other than - "deflation".
3. As I understand, even Eric started with 1D analyze and WAS a "deflationist" (you can find it on this blogg)...
With time Eric DEVELOPED his analyze on the 3D situation - and it is obvious that Erics analyzes are far, far, far (!) deeper and more correct (real in longer run!) than those from Mish " the Prophet".

Even Peter Shiff has more understandings in my point of view than "the Prophet" , but he has (I personally believe) just correct feeling based on his long experience in finance.

Eric, on the other side has not just feeling, but a ability to put ALL variables in "3D" (REAL!) financial analyze and extract (simulate!) the correct results.

But Anon,
as said... Please be not disturbed by my opinion.
Kind regards
Natasa

Wrong. Hyperinflation will begin in the United Sta...

2009-06-30T04:42:57.117-07:00

Wrong. Hyperinflation will begin in the United States in 129-Days. In November when the U.S. Dollar Index touches 65, foreigners will have had it with the collapsing dollar. The dollar peaked at 121.02: with the dollar losing 50 percent of its' purchasing value, foreign countries will begin a massive exodus. The United States Dollar is finished as a world reserve currency. The only way to prop the dollar is by distraction through terrorist attack or more swine flu.

Natasa You have no idea what your talking about. ...

2009-05-27T23:30:30.210-07:00

Natasa

You have no idea what your talking about. I too think Mish is arrogant, but he tend to be correct. To call us his "blind "site followers"" demonstrates your ignorance. If you read his blog and studied his charts you would know this. As a previous inflationist I initially followed Peter Shiff and was invested overseas, lucky for me I found Mish, and Minyanville if not I like Shiff's investors would have been burned. The proof is in the pudding.

having to read all of the article and comments.. i...

2009-05-25T00:49:27.148-07:00

having to read all of the article and comments..
i have a headache.
as a college student striving to get of of this sinkhole in economy, your words act as my internet news eric..
i just wish that i found your site sooner.
cheers and fight on~

Great article Eric... as many I have read those da...

2009-04-05T00:47:00.000-07:00

Great article Eric... as many I have read those days on your site.

The guy "Mish" - is one unbelievable arrogant man.
He was not able to discuss with you on the normal and intelligent level because of his lack of imagination and his arrogance. He did not discuss at all at the beginning, but try to make fun of your so unconventional, but extremely logical view on the GFC.

You war gentleman complete time of so called "discussion" (it was never a discussion, but lecture to an arrogant man!) - and I find it very good too, when you decided to cut this meaningless talk with this Mish - "the Prophet". Good timing Eric!

BTW - I check also his (Mish - "The Prophet") side since it looks that this gay pursued himself (with help of his blind "site followers") that he is - a "Prophet" (or something like this)... That is not strange at all that he has "the followers" too - those days.
I understand that he do not like you - but you of course completely destroyed this arrogate man. I am sure that Mish - "The Prophet" will NEVER ever post anything on your site - after this stigma of himself!
Additionally, I did not understand - why he was angry on another guy - namely Peter Shiff. It looks that Mish not just "do not like" Peter - but is VERY angry on him!
When I check little bit Peter Shifs blogg too - it looks like Peter share some of your views on this GFC and that is what irritate "the Prophet" - Mish... haha...
"The Prophet" Mish - has NO idea what should be solution of the GFC.
He (as each "Prophet") just "see - Deflation"... That is his - "final count down"...
AND for one "Prophet" - that is good enough...haha.
If somebody (you or even Shiff) try to see little bit further - behind the "Prophets Deflation" - he (the "Prophet Mish") - must hate you and defend his "prophecy"... haha...

Eric, once again - great blogg and really unusual, but so logical explanation of the present events.
Thank you very much.

Making money of this seems to be difficult. If the...

2009-03-20T00:55:00.000-07:00

Making money of this seems to be difficult.
If the chinese decide to control inflation, they will sell the dollar against yuan, leaving the yuan as a unilaterally appreciating currency.

So, after the first phase of massive increases in commodity prices in dollars, we might not have much to play with in terms of currency speculation.
-Timur

Interesting article. While I'm not 100% certain wh...

2009-03-15T20:52:00.000-07:00

Interesting article. While I'm not 100% certain whether you're analysis is correct, I will say that if China is faced with the choice of dumping the US$ or hyperinflation, it will dump the US Dollar period. Everybody seems to forget their 20th century history. One of the main reasons for the Communists' victory over the KMT in 1949 was hyperinflation caused by KMT monetary mismanagement. I'm sure the current leadership will see the irony of the situation and will do anything to prevent the same fate from befalling themselves.

Wouldn't the hyperinflation's effect on US be limi...

2009-03-15T20:35:00.000-07:00

Wouldn't the hyperinflation's effect on US be limited to the percentage of our spending on Chinese goods? As opposed to domestically-produced food and cars, and Middle-East oil?

HELLO FROM SAUDI ARABIA:Eric - you mentioned we'll...

2009-03-04T08:43:00.000-08:00

HELLO FROM SAUDI ARABIA:

Eric - you mentioned we'll be "buying oil in Khaleeji and consumer goods in Yuan".

I'm paid in Saudi Riyals and save in Euros and thinking of "skating to where the puck will be" (Wayne Gretzky's claim to why he scored so many goals).

I'm not fishing for investment advice - I've already reached the same conclusions you have.

But I'm thinking of splitting my Euro portfolio 3 ways:

1:Euros (until gold retreats to $750 - ha ha).

2:Energy backed currencies (Khaleeji)

(and Arab banks don't seem exposed to eastern europe).

3: Yuan.

(and China doesn't seem exposed to eastern Europe either)

So what am I missing ? What's the chance governments suddenly outlaw gold bullion ownership. Couldn't we just cash out the gold - into some currency - or would governments actually CONFISCATE private bullion ?

Any opinions welcomed.

Robert

Hyperinflation - I am really not sure if it is a c...

2009-02-22T19:55:00.000-08:00

Hyperinflation - I am really not sure if it is a certainty, for China or elsewhere. The risk of hyperinflation - globally - is definitely rising. But the end game really depends on what governments do. The top priority of decision makers are still "stay in power". They will follow that to keep the regime. If that means hyperinflation, yes they will do it. If that means socialism, sure.

China would not be able to export hyperinflation, as excess capacity is just everywhere. To deal with domestic inflation (if it ever comes), China would soak domestic liquidity by investing overseas in resources, as aggressive as possible. Even if that drives up commodity prices, China would keep certain price control to curb domestic inflation. In that way the low RMB game can be played for quite a while.

Great debate people!!I would like to hear a little...

2009-02-22T09:32:00.000-08:00

Great debate people!!
I would like to hear a little more discussion about the gulf countries forming their own currency. From what little I've read, sounds like they are shooting for this Sept. or early 2010 at the latest. The agreement we've had with opec has really allowed us the freedom to run huge deficits and wage almost continual wars for the last 50 years (including cold war). This torpedo to our economy seems to be unavoidable. China's relation is potentially as harmful. So is peak oil. What to you guys think

Your hypothesis is interesting, but in order to un...

2009-02-19T10:04:00.000-08:00

Your hypothesis is interesting, but in order to understand interaction of your assumptions, try to model and simulate the problem in interest. You may find surprising outcome.

Gordy Three horses you're ignoring the fact that d...

2009-02-16T16:39:00.000-08:00

Gordy Three horses you're ignoring the fact that demand is irrelevent to the price rising. The price won't be rising because of the demand for those things, it's going to be rising because of rising borrowing costs. This means that anything that requires credit will be passed on to the comsumer. That's anything, surely you need some things to survive. You should be paying more attention to the fact that Walmart has the cheapest stuff. If you say those things in Walmart are things we don't need then think of the prices of the things we need which are not in Walmart. You're also ignoring the fact that, and I like the way Eric put this before, US' manufacturing sector is worse than that of a third world country. So everything we have requires borrowing, meaning prices of everything we have will rise. EVERYTHING! And I know we can't get out of it with more production, not as long as we are still using the US dollar. There is too much debt with the US dollar and it's an insurmountable amount of production we need to do to balance that debt with supply of products. This is why I say we are witnessing the collapse of the US dollar and all paper money and lending for that matter and gold/silver is becoming money again and this will be better for the world economies. The bailouts are stalling the inevitable. And the inevitable will happen before this year is over. The path to the inevitable will include rising prices.

yes we really can DO WITHOUT COMPUTERS AND CELL PH...

2009-02-16T13:59:00.000-08:00

yes we really can DO WITHOUT COMPUTERS AND CELL PHONES, VIDEO GAMES, TV, RAIDOS, I-PODS, MP3 PLAYERS, CARS. YOU WILL NOT CEASE TO EXSIST WITHOUT THESE ITEMS, YOU WILL NOT BE AS LAZY OR SPOILED THOUGH. I GREW UP IN THE ALASKAN WILDERNESS AND I NEVER HAD THESE ITEMS AND I WOULDN'T MISS THEM NOW. I CAN ALWAYS SURVIVE JUST AS MY ANSESTERS DID FOR THOUSANDS OF YEARS BEFORE THE WHITE MAN CAME TO DESTROY OUR CULTURE AND WAY OF LIFE. A FEW OF US STILL HONNOR AND UNDERSTAND THE OLD WAYS. FOR THOSE WHO DON'T, WELL YOU'RE JUST SHIT OUT OF LUCK.