Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Report Hyperinflation!

Stock-Markets / HyperInflation Nov 29, 2011 - 01:03 PM GMT

By: UnpuncturedCycle

Stock-Markets

Best Financial Markets Analysis ArticleI read article after article warning us that excessive printing in the western world is going to produce hyperinflation, and I’ve heard good analysts calling for hyperinflation for almost five years now. Lately the call seems to have morphed into a plea. The Federal Reserve Chairman has pledged to do his part, dropping money out of helicopters if need be, so how could we have deflation given such declarations? We all know that the Fed has created almost US $4 trillion out of thin air over the last three years, so why are the prices of everything from commodities, stocks, real estate and housing on the decline, and why is the US dollar on the rise. It’s a valid question and I want to try to come up with an answer in this report.


Most people including a lot of analysts are convinced that the one and only requirement for high inflation is an expanding money supply, but that’s a dangerous oversimplification. We know that the Fed has been expanding the money supply, but it will surprise many to know that it recently turned down from record highs. Take a look at this chart:

While it’s true that percentage change for M-1 recently made a new high, it’s also true that the broad M-3 measure is a long way from where it was in late 2007 and that may pull the entire base lower.

The last time we experienced a decline occurred when QE1 wore off and the Fed then needed to rush in with QE2. I believe the recent decline is a signal that QE3 is needed but there doesn’t seem to be much political will to crawl out on that limb right now. The Fed and Congress seem to be playing a game of chicken and the economy is at stake. The Fed does not want to take responsibility for initiating QE3 and Congress doesn’t want to ask for more easing with elections in the wings.

As far as Europe is concerned we can see that the ongoing crisis is having a drastic affect on its money supply:

Europe is also facing elections in the coming months and, combined with growing social unrest, there it little support for another round of quantitative easing although rumors abound. Early yesterday morning it was published that Italy would receive US $600 billion from the IMF and a package was in the works for Spain. The IMF later denied all of that so the problems continue to mount.

So we’ve experienced sharp increases in the money supply it now appears that in both the US as well as Europe supply is on the decline. You’ll never hear this on Bloomberg but there are more important determinants to inflation than money supply. If I want to know whether or not we have inflation in the pipeline I look at first at the money multiplier:

and then at the velocity of money

With these two charts in mind it is extremely important that you try to understand the following: in no possible world can you have inflation/hyperinflation with these two charts declining as they have been over time. You can print until hell freezes over and you will still be condemned to deflation.

How can the Fed and the ECB print as much as they did and not produce inflation? In very simple terms all that money was not meant for public consumption and it did not produce one bit of growth. It went to a select few and the bill was passed to the many. Debt ballooned as the economy and the tax base shrunk and that is an untenable situation. More printing, and there will be more, will only serve to crowd the private sector out of the debt markets more than they are today. Today’s banks are like pigs at a trough and they are insatiable. They have over US $700 trillion in derivatives to deal with and it will eventual destroy the system as it stands today. The only real solution id to write debt off, but again we have no political will for that. The market will not stand still for ever and it will eventually do the job for the greedy politicians who run today’s show.

Giuseppe L. Borrelli
www.unpuncturedcycle.com
theunpuncturedcycle@gmail.com

Copyright © 2011 Giuseppe L. Borrelli

- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in