SBSS 29. The End Of The Inflation Deflation Debate

I strongly believe that we will have a hyper inflationary depression, but if we do have a deflationary depression, the cure is still the same, gold and silver.  In either a inflationary or deflationary case, the unsustainable fiat world stops and the entire complex, debt based, system collapses.  There will be no functioning currency, no functioning economy, no international and domestic trade, no earnings to value stocks, no rents to value properties.  Then there are the very real and very dangerous social consequences of this collapse, riots, starvation, disease and war.  The entire paper wealth of the world will implode in either case.  The only choice they have is to how long and how much energy are the Elite going to put into sustaining the unsustainable?
The only thing that will be left standing is stuff that has REAL tangible, intrinsic value.  Things that people need to live like food, water, and guns.  Commodities will have value, but most will get destroyed since so much of their wealth is determined by credit and trade.  Without a functioning economy, what is corn in Iowa worth if there is no market that will buy it, or worse how do they plant the corn if they cannot buy the seed from Monsanto or get the fertilizer or fuel to harvest and transport the crops?
Gold and silver need nothing to show their value.  They are worth something simply because they are rare and have uses.  Actually a collapsing credit market may actually catapult gold and silver by eliminating the major players that have held gold and silver down through paper manipulation schemes.  It may also help the gold and silver market as people lose faith in all other paper assets and rush into the very small precious metal market.
Say we do have a grinding deflation, and the nominal price of gold and silver goes down. The REAL purchasing power of the metal can actually go up in value as all other credit/debt based assets collapse.  For example if we get a market that has no credit available or mortgage rates are 24% and only for available for shorter, more rational terms like 10 years, what do you think the value of your house will be relative to silver.  What would the economy and the job market be like if someone could afford that property?  What do you think that would do to the thousands of other properties that are going to be flooding the market?  What do you think of all of that debt tied to it?  What do you think that is going to do to the property taxes as towns become desperate to find money?  I could see a house that was once sold for $300,000 only sell for $30,000.  Silver on the other hand might go up, because of the rush into real tangible value, but let us say it does go down in price from $30 by 70% to $9.  The ratio to buy that house went from 10,000 ounces of silver to buy that house to 3,333.  A huge increase in REAL purchasing power during a deflation.  And if we have that kind of crushing deflation, people will walk away from their houses in magnitudes more than what we have already seen in the 2008 housing crisis.  I believe that we will actually see more significant increases in REAL purchasing power in the more predictable hyper inflationary depression.
Can we finally move on from this inflation/deflation debate and just say that either way, the paper debt paradigm is done?  Bonds, will not save you as more money is thrown on to the fire to keep the economy going, destroying the real inflation adjusted returns of the bond.  Bonds will not be paid if nations default and we have seen even the highest rated bonds are junk in reality.  This is not a shift from equity to debt markets, it is a shift from paper wealth to real wealth.  Nothing will stop this train and only those that can see it coming will be able to prepare for it.

19 comments to SBSS 29. The End Of The Inflation Deflation Debate

  • VIPER131

    Nice video Silver Shield. Keep up your excellent work.

    Below are not my words — but eloquently handles the deflations/inflation issue.
    The full commentary is available at: http://woodpilereport.com/

    note: Ole Remus and the Woodpilereport comes out every Tuesday. Should be on everyone’s reading list.

    In summary: The Federal Reserve Policy is to ‘Go Japanese’ which is to allow gradual deflation by just enough monetary easing to adequately mask the deflationary pain without killing off the banking class. This means a slow, drawn-out process of currency debasement and stagnant growth for years to come.

    VIPER131
    ———————————————————————

    Inflation masks the wealth transfer whereas deflation is austerity and puts it out there for all to see. Only under inflation can the political class cover the losses of the banking class without causing riots. With deflation, which has been the main process thus far, it is easy to see how the banks are being bailed out while the common people go bankrupt. That is how the Occupy Movement got started. This is why they are rioting in Greece and throwing Molotov cocktails at tax offices in Italy.

    Governments love inflation and hate deflation. The net result for middle class wealth doesn’t change either way but with inflation the political class can enrich the banking class, nicely hidden with a fiscal Klingon Cloaking Device.

    Unfortunately, the deflationary process will never go away until the debt is cleared. Theoretically, as Bernanke mentioned in his famous helicopter speech, the Treasury could print away the debt but this would be hideously inflationary, probably hyperinflationary. Hyperinflation is always the result of the political class deciding to address debt by printing. The banking class understands hyperinflation wipes out everything, including the banks, which is why Bernanke the Central Banker doesn’t follow the advice of Bernanke the Academician who criticized Japan’s handling of its own credit bust, saying “political constraints, rather than a lack of policy instruments, explain why deflation has persisted for as long as it has.” As we have seen in Japan, the banking class simply won’t allow the political class to print without restriction.

    So the policy that the Fed has taken, and will continue to take as a member of the banking class—the Fed is a private business controlled by private bankers and “supervised” by Congress—is to allow gradual deflation by just enough monetary easing to adequately mask the deflationary pain without killing off the banking class. This means a slow, drawn-out process of currency debasement and stagnant growth for years to come.

    When we reach the financial cliff in 2013 the political class will react with further malinvestment by raising the debt ceiling, continuing low tax rates, “stimulus”, etc. There will be no overt austerity, at least not enough to cause riots. Riots in Europe are a frat party compared to riots in America. We don’t just burn a few cars, we burn entire cities.

    Until the debts are finally cleared, austerity will always be there under surface. It looks like we’re ‘going Japanese’. Maybe some day Bernanke Junior will write, “Political constraints, rather than a lack of policy instruments, explain why America’s deflation has persisted for as long as it has.”

    • lastmanstanding

      Well said 131…”they” will lose the slow burn.

      all…please make your best attempt to “get to the other side.”

      “live free or die.”…I don’t plan on leaving the earth until I am assured that the younger generations are safe…but they must wake up and realize that things are not in there favor.

      Hell, it has never been in our favor…but our lives have still been great.

  • David baker

    Buy a house for 200oz great,just what i need,.,.,.

  • Gareth

    ‘They’ will not allow too much deflation as it decreases velocity as the sheeple become scared to spend…….and save instead. The governments want a certain amount of velocity as they TAX transactions. The less velocity there is, the less they take in TAXES.

    The Germans in the Weimer Republic saved for a few years before they hyper-inflated. Hyper-inflations – historically – happen to nations of savers.

    When M3 – the UK equivalent of US M4 – contracted in recent years due to folk paying off debt and not rolling it over or taking on more, the BofE increased M1 to keep M3 the same. There’ll be a point where M1 is a significant portion of M3/M4 and then the end game of the fiat is right on our doorstep. That is, of course, if noting else occurs e.g. war and oil shortages.

    Good luck

  • bluesky

    Thanks for exposing the truth… 9$ silver maybe on the way?

    • lastmanstanding

      don’t “hope” for $9 silver…buy while you can.

      last week, my dealer who had been crowing that no shortages existed for years…in 24 hrs. changed his tune…

      • Silver Shield

        That is right. You buy often and consistently. Waiting for a certain price is like waiting to win the lottery. Everyday is a gift when you can trade fake fiat for priceless silver.

        • lastmanstanding

          Was in to see my guy today…he has sold more silver in the last 4 days than he has in the last 4 months…

          People are no longer selling gold and silver, they are buying.

          One poor guy came in to sell a significant amount of gold and silver…why?

          To keep his business and his employees in a job…because “they” want it all and he won’t give up.

          It is happening all over the United States of America. The govt, the politicians, and the corps are fucking ruining those who won’t give up.

          “don’t go down without one helluva fight.”…and not even then.

  • by letting he Chinese direct access to the fed ,also means they can ALSO DIRECTLY DUMP TREASURIES BACK TO THE FED to destabilize the US $ Dollar……..
    HYPERINFLATION

  • Trafix

    The powers that be want a world government and the United States with our constitution is a hindrance to that. My guess is they will not slow burn over a long period of time, but when they are ready, they will implode the financial system and move in quickly to take control. They just don’t have the fema camps and their brownshirts fully operational yet…

  • Rainmaker

    We are going to have both. Inflation of all the items one needs to live, and deflation of everything else. Gareth is right, spending is down. Everyone is holding on to their hard earned. Luckily, the rush to convert has not really even started, yet………

  • Revelation 17:

    Standing afar off for the fear of her torment, saying, Alas, alas that great city Babylon, that mighty city! for in one hour is thy judgment come.

    11 And the merchants of the earth shall weep and mourn over her; for no man buyeth their merchandise any more:

    12 The merchandise of gold, and silver, and precious stones, and of pearls, and fine linen, and purple, and silk, and scarlet, and all thyine wood, and all manner vessels of ivory, and all manner vessels of most precious wood, and of brass, and iron, and marble,

    13 And cinnamon, and odours, and ointments, and frankincense, and wine, and oil, and fine flour, and wheat, and beasts, and sheep, and horses, and chariots, and slaves, and souls of men.

    “FOR IN ONE HOUR SUCH GREAT WEALTH HAS BEEN BROUGHT TO RUIN”

    • Silver Shield

      Now re write that using stocks, bonds, CDs, Ira, 491k, pensions , real estate and how quadrillions in great wealth will be brought to ruin…

  • The general consensus certainly seems to be that silver is the currency of choice for when the fertilizer hits the ventilator. Notwithstanding, food, medicine, water filtration, and ammo are more important.

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