What goes up...

[68Camaro]

What is interesting from this discussion, and useful because it keeps me on my toes, is that Jon (among others) can look at exactly the same events and data and come to a completely opposite conclusion as myself (and still others). I won't itemize them or debate them further from above, but they are numerous.

No matter what positions we each take, take care. At least those here are thinking, and preparing for something, right or wrong, no matter the direction, and that is more than literally 99% of the rest of the public are doing. I hate to see any thinkers come to harm over bad decisions or directions. Myself included.

Best wishes, Rich

[Treetop]

It seems to me its all ready been decided that the dollar will be phased out as the global reserve currency. Many big players calling for it, and even officials in our government saying they arent against it, though I think it was retracted later. If you delve into that issue specifically, the idea is to do it slowly so as not to crash the dollar to fast, being how so many other economies are propped onto it. I personally think this is what this QE stuff is all about. It is a purposefully done and managed decline. relating different world events to this one and how the power players wanted things to go and how they did go.... implies to me any rise in USD will be short lived at best. it will continue to be watered down, until it is where TPTB want it to be.

Charts are meaningless if it is indeed true the dollar is being walked through a decline, and a new reserve currency being formed. these arent economic forces alone. Which are you could argue bottom up numbers, this is a top down decision imo.

that said.... halting the QE stuff for awhile simply helps ensure it doesnt happen to fast. If it happens to fast, if panic flooded the markets, we could be wiemar in a month. Heck the circles openly talking about using the IMFs drawing rights to make a currency do indeed fear just that. So perceived "ups" in the USD as it is lowered, or perceived leveling out of our economic issues, serves that immensely. fundamentally I see nothing as having changed, we are on all the same cliffs, but someone could easily hold a picture up of a place that isnt a cliff and convince many. Since the fundamentals still all show the danger, well a rallying dollar within that context would certainly tell me that very possibly the plan is right on track.

[aristobolus]

I appreciate your charts, Jon- and your other posts.

Another problem with this chart (besides the culture thing I referenced earlier) is that the "dollar" thing that is supposedly the constant has changed over the years. It is not even proper to see it as the same dollar referenced up to 1964, which was defined by its compostion in silver. We have a new dollar already, it is the FRN.

My belief is that like the Old Western Roman Empire of the 300-400's AD, we as a nation are running off of the steam, accomplishments, and society of the previous generations. Our MILITARY proweress is THE THING that makes our FRN's of any real value. But Pax Americana is slowly coming to an end; we can only put out so many hotspots in order that our current World Order may be preserved. Another Order is emerging: notice how not only Russia and China, but also India, Brazil and even GERMANY abstained in the latest UN Resolution 1973 regarding Libya which was spearheaded by Old Europe and the Old New World of the U.S.

To believe in the Dollar is to believe in the entity that issues it. I'm glad you are an optimist; we need people like you.

[Mossy]

A historical chart like the one shown is useful, but only until something fundamental changes. I think we have a fundamental change. I don't expect the dollar to come back any time soon, and it will trade for a lot fewer beans and BTU's when it does. If it does.

[Jonflyfish]

Looking across the wall of screens, it looks like the USD is about to spring a fairly sizable and surprising bounce against currencies and commodities, metals as well- DYOD
Cheers,
Jon

[68Camaro]

Really? I would be surprised if there wasn't an attempt to support it, but looks like its still going down.

Looking across the wall of screens, it looks like the USD is about to spring a fairly sizable and surprising bounce against currencies and commodities, metals as well- DYOD
Cheers,
Jon

[shinnosuke]

Perhaps short-term bounce because people who don't know about PMs will seek the dollar for stability. Long-term: Slim Pickens is riding that bomb all the way down.

Link and article:
http://online.wsj.com/article/SB10001424052748703313304576132170181013248.html

Why the Dollar's Reign Is Near an End
By BARRY EICHENGREEN

The single most astonishing fact about foreign exchange is not the high volume of transactions, as incredible as that growth has been. Nor is it the volatility of currency rates, as wild as the markets are these days.

Instead, it's the extent to which the market remains dollar-centric.

..Consider this: When a South Korean wine wholesaler wants to import Chilean cabernet, the Korean importer buys U.S. dollars, not pesos, with which to pay the Chilean exporter. Indeed, the dollar is virtually the exclusive vehicle for foreign-exchange transactions between Chile and Korea, despite the fact that less than 20% of the merchandise trade of both countries is with the U.S.

Chile and Korea are hardly an anomaly: Fully 85% of foreign-exchange transactions world-wide are trades of other currencies for dollars. What's more, what is true of foreign-exchange transactions is true of other international business. The Organization of Petroleum Exporting Countries sets the price of oil in dollars. The dollar is the currency of denomination of half of all international debt securities. More than 60% of the foreign reserves of central banks and governments are in dollars.

The greenback, in other words, is not just America's currency. It's the world's.

But as astonishing as that is, what may be even more astonishing is this: The dollar's reign is coming to an end.

I believe that over the next 10 years, we're going to see a profound shift toward a world in which several currencies compete for dominance.

The impact of such a shift will be equally profound, with implications for, among other things, the stability of exchange rates, the stability of financial markets, the ease with which the U.S. will be able to finance budget and current-account deficits, and whether the Fed can follow a policy of benign neglect toward the dollar.

The Three Pillars
How could this be? How could the dollar's longtime most-favored-currency status be in jeopardy?

OECD Secretary-General Jose Angel Gurria sat down with Dow Jones FX Trader during the meeting of G20 finance officials in Paris to talk about global imbalances and the euro zone's debt crisis.
.View Full Image

See the share of global foreign-exchange transactions involving the dollar, and the dollar's share of official global foreign-exchange reserves.
.To understand the dollar's future, it's important to understand the dollar's past—why the dollar became so dominant in the first place. Let me offer three reasons.

First, its allure reflects the singular depth of markets in dollar-denominated debt securities. The sheer scale of those markets allows dealers to offer low bid-ask spreads. The availability of derivative instruments with which to hedge dollar exchange-rate risk is unsurpassed. This makes the dollar the most convenient currency in which to do business for corporations, central banks and governments alike.

Second, there is the fact that the dollar is the world's safe haven. In crises, investors instinctively flock to it, as they did following the 2008 failure of Lehman Brothers. This tendency reflects the exceptional liquidity of markets in dollar instruments, liquidity being the most precious of all commodities in a crisis. It is a product of the fact that U.S. Treasury securities, the single most important asset bought and sold by international investors, have long had a reputation for stability.

Finally, the dollar benefits from a dearth of alternatives. Other countries that have long enjoyed a reputation for stability, such as Switzerland, or that have recently acquired one, like Australia, are too small for their currencies to account for more than a tiny fraction of international financial transactions.

What's Changing
But just because this has been true in the past doesn't guarantee that it will be true in the future. In fact, all three pillars supporting the dollar's international dominance are eroding.

First, changes in technology are undermining the dollar's monopoly. Not so long ago, there may have been room in the world for only one true international currency. Given the difficulty of comparing prices in different currencies, it made sense for exporters, importers and bond issuers all to quote their prices and invoice their transactions in dollars, if only to avoid confusing their customers.

Now, however, nearly everyone carries hand-held devices that can be used to compare prices in different currencies in real time. Just as we have learned that in a world of open networks there is room for more than one operating system for personal computers, there is room in the global economic and financial system for more than one international currency.

Second, the dollar is about to have real rivals in the international sphere for the first time in 50 years. There will soon be two viable alternatives, in the form of the euro and China's yuan.

Americans especially tend to discount the staying power of the euro, but it isn't going anywhere. Contrary to some predictions, European governments have not abandoned it. Nor will they. They will proceed with long-term deficit reduction, something about which they have shown more resolve than the U.S. And they will issue "e-bonds"—bonds backed by the full faith and credit of euro-area governments as a group—as a step in solving their crisis. This will lay the groundwork for the kind of integrated European bond market needed to create an alternative to U.S. Treasurys as a form in which to hold central-bank reserves.

China, meanwhile, is moving rapidly to internationalize the yuan, also known as the renminbi. The last year has seen a quadrupling of the share of bank deposits in Hong Kong denominated in yuan. Seventy thousand Chinese companies are now doing their cross-border settlements in yuan. Dozens of foreign companies have issued yuan-denominated "dim sum" bonds in Hong Kong. In January the Bank of China began offering yuan-deposit accounts in New York insured by the Federal Deposit Insurance Corp.

Allowing Chinese companies to do cross-border settlements in yuan will free them from having to undertake costly foreign-exchange transactions. They will no longer have to bear the exchange-rate risk created by the fact that their revenues are in dollars but many of their costs are in yuan. Allowing Chinese banks, for their part, to do international transactions in yuan will allow them to grab a bigger slice of the global financial pie.

Admittedly, China has a long way to go in building liquid markets and making its financial instruments attractive to international investors. But doing so is central to Beijing's economic strategy. Chinese officials have set 2020 as the deadline for transforming Shanghai into a first-class international financial center. We Westerners have underestimated China before. We should not make the same mistake again.

Finally, there is the danger that the dollar's safe-haven status will be lost. Foreign investors—private and official alike—hold dollars not simply because they are liquid but because they are secure. The U.S. government has a history of honoring its obligations, and it has always had the fiscal capacity to do so.

But now, mainly as a result of the financial crisis, federal debt is approaching 75% of U.S. gross domestic product. Trillion-dollar deficits stretch as far as the eye can see. And as the burden of debt service grows heavier, questions will be asked about whether the U.S. intends to maintain the value of its debts or might resort to inflating them away. Foreign investors will be reluctant to put all their eggs in the dollar basket. At a minimum, the dollar will have to share its safe-haven status with other currencies.

A World More Complicated
How much difference will all this make—to markets, to companies, to households, to governments?

.One obvious change will be to the foreign-exchange markets. There will no longer be an automatic jump up in the value of the dollar, and corresponding decline in the value of other major currencies, when financial volatility surges. With the dollar, euro and yuan all trading in liquid markets and all seen as safe havens, there will be movement into all three of them in periods of financial distress. No one currency will rise as strongly as did the dollar following the failure of Lehman Bros. There will be no reason for the rates between them to move sharply, something that would potentially upend investors.

But the impact will extend well beyond the markets. Clearly, the change will make life more complicated for U.S. companies. Until now they have had the convenience of using the same currency—dollars—whether they are paying their workers, importing parts and components, or selling their products to foreign customers. They don't have to incur the cost of changing foreign-currency earnings into dollars. They don't have to purchase forward contracts and options to protect against financial losses due to changes in the exchange rate. This will all change in the brave new world that is coming. American companies will have to cope with some of the same exchange-rate risks and exposures as their foreign competitors.

Journal Communitydiscuss..“ I'm waiting for the pitch to buy gold and the suggestion we buy guns etc to get ready for the riots. If the the dollar stops being the reserve currency, it won't happen in my lifetime
”
.—Alan Gordon.
Conversely, life will become easier for European and Chinese banks and companies, which will be able to do more of their international business in their own currencies. The same will be true of companies in other countries that do most of their business with China or Europe. It will be a considerable convenience—and competitive advantage—for them to be able to do that business in yuan or euros rather than having to go through the dollar.

U.S. Impact
In this new monetary world, moreover, the U.S. government will not be able to finance its budget deficits so cheaply, since there will no longer be as big an appetite for U.S. Treasury securities on the part of foreign central banks.

Nor will the U.S. be able to run such large trade and current-account deficits, since financing them will become more expensive. Narrowing the current-account deficit will require exporting more, which will mean making U.S. goods more competitive on foreign markets. That in turn means that the dollar will have to fall on foreign-exchange markets—helping U.S. exporters and hurting those companies that export to the U.S.

My calculations suggest that the dollar will have to fall by roughly 20%. Because the prices of imported goods will rise in the U.S., living standards will be reduced by about 1.5% of GDP—$225 billion in today's dollars. That is the equivalent to a half-year of normal economic growth. While this is not an economic disaster, Americans will definitely feel it in the wallet.

On the other hand, the next time the U.S. has a real-estate bubble, we won't have the Chinese helping us blow it.

Dr. Eichengreen is the George C. Pardee and Helen N. Pardee professor of economics and political science at the University of California, Berkeley. His new book is "Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System." He can be reached at reports@wsj.com.

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
http://www.djreprints.com

[whatsnext]

Is it just me or did you look at this and think, "does the price of commodities drive war?" It seemed that the peak was always a big war!

Holy crap our rise is the currency war, an unprecedented war.

I'm slow

[Mossy]

Is it just me or did you look at this and think, "does the price of commodities drive war?" It seemed that the peak was always a big war!

I (finally) copied it to my computer and loaded into "Paint" so I could draw lines, then looked up some dates. WWI and WWII are displaced to show the peaks that the wars caused, not the wars themselves. Viet Nam is a trough, but Korea is a flat spot on the WWII peak.

Also: Didn't the Federal Reserve adopt a "no deflation" policy sometime after WWII? That would account for the lack of deflations in recent years.

The Cold War increase occurred while Nixon, Ford, Carter, and Reagan were in office; a little bit under Nixon, nearly half under Ford, most of the rest under Carter, then a little under Reagan. I don't think that just the political party of the President is that closely related to the rate of inflation. If there's something there, it would be in the invisible, the "gang" behind the man.

Nixon entered office after the trough, so I don't see anything supporting his taking the US off gold being related to the lack of deflation in that part of the graph.

[HoardCopperByTheTon]

In order to have real inflation, money supply must be expanded. Velocity of bank reserves must be in motion. I do not see that happening now, nor anytime in the near future. Any "money printing" has simply been shoring up the balance sheets at the banks, NOT lining the pockets of the commoner. Until that happens, you can kiss the "wheelbarrow full of paper for a loaf of bread" concept goodbye. It will happen later, not in the near future. Unless you feel otherwise, please send your wheelbarrow full of FRN's to me. I'll make you the best tasting bread you'll ever eat in return.

I like this! But alas, all my wheelbarrows are full of copper.. kind of hard on the dental work.

[Treetop]

In order to have real inflation, money supply must be expanded. Velocity of bank reserves must be in motion. I do not see that happening now, nor anytime in the near future. Any "money printing" has simply been shoring up the balance sheets at the banks, NOT lining the pockets of the commoner. Until that happens, you can kiss the "wheelbarrow full of paper for a loaf of bread" concept goodbye. It will happen later, not in the near future. Unless you feel otherwise, please send your wheelbarrow full of FRN's to me. I'll make you the best tasting bread you'll ever eat in return.

I like this! But alas, all my wheelbarrows are full of copper.. kind of hard on the dental work.

well if we get to the point of wheel barrows of paper for a loaf of bread, im guessing a fanny pack of copper should be good enough.

[TXBullion]

In order to have real inflation, money supply must be expanded. Velocity of bank reserves must be in motion. I do not see that happening now, nor anytime in the near future. Any "money printing" has simply been shoring up the balance sheets at the banks, NOT lining the pockets of the commoner. Until that happens, you can kiss the "wheelbarrow full of paper for a loaf of bread" concept goodbye. It will happen later, not in the near future. Unless you feel otherwise, please send your wheelbarrow full of FRN's to me. I'll make you the best tasting bread you'll ever eat in return.

I like this! But alas, all my wheelbarrows are full of copper.. kind of hard on the dental work.

well if we get to the point of wheel barrows of paper for a loaf of bread, im guessing a fanny pack of copper should be good enough.

Well have to figure out something cooler than a fanny pack though

[bankmining]

well if we get to the point of wheel barrows of paper for a loaf of bread, im guessing a fanny pack of copper should be good enough. [/quote]

Well have to figure out something cooler than a fanny pack though [/quote]


If we ever get to this SHTF scenario, I always pictured us like characters from some biblical story - walking and carrying our PM's in little draw-string pouches as needed for trades/bartering

[68Camaro]

In order to have real inflation, money supply must be expanded. Velocity of bank reserves must be in motion. I do not see that happening now, nor anytime in the near future. Any "money printing" has simply been shoring up the balance sheets at the banks, NOT lining the pockets of the commoner. ...
It will happen later, not in the near future. ...

This is true. Later... How much later, is the question. And what is your definition of near future? If you mean next week, or next month, then ok - nothing major is likely to happen in that time. But near future to me includes this year, and next, and the next. If the money is in the system it will affect prices eventually. I don't think anyone can predict the actual time lag, but it's already starting. I'm already paying significantly more for food both at the grocery store as well as restaurants (which are printing new menus, with new prices). (Fuel is up, of course - though pricing for oil includes other variables.) Cotton has doubled. Wheat has doubled and expected to go to 3x. Etc. At some point it all starts to compound. The increased fuel causes food to go up more. It may take another 6 months to really get rolling, and another year or two or three before full affect, but the damage is now done, and can't be stopped without inflicting pain that the policitians won't tolerate and the "people" won't understand. Even if we don't see "hyper" inflation, we've got a terrible road ahead of stagflation - declining economy with significant (double-digit) inflation, for multiple years.

[jasmatk]

. We also have to consider the inevitable, we die.

THAT SAYS IT ALL!!!!

[Jonflyfish]

In order to have real inflation, money supply must be expanded. Velocity of bank reserves must be in motion. I do not see that happening now, nor anytime in the near future. Any "money printing" has simply been shoring up the balance sheets at the banks, NOT lining the pockets of the commoner. ...
It will happen later, not in the near future. ...

This is true. Later... How much later, is the question. And what is your definition of near future? If you mean next week, or next month, then ok - nothing major is likely to happen in that time. But near future to me includes this year, and next, and the next. If the money is in the system it will affect prices eventually. I don't think anyone can predict the actual time lag, but it's already starting. I'm already paying significantly more for food both at the grocery store as well as restaurants (which are printing new menus, with new prices). (Fuel is up, of course - though pricing for oil includes other variables.) Cotton has doubled. Wheat has doubled and expected to go to 3x. Etc. At some point it all starts to compound. The increased fuel causes food to go up more. It may take another 6 months to really get rolling, and another year or two or three before full affect, but the damage is now done, and can't be stopped without inflicting pain that the policitians won't tolerate and the "people" won't understand. Even if we don't see "hyper" inflation, we've got a terrible road ahead of stagflation - declining economy with significant (double-digit) inflation, for multiple years.

Yes. Fuel up, food up. Neither at all time highs. You seem to be comparing price to recent lows. Gas has been higher (than it was after it crumbled from all time highs) but as we see today, the petroleum market is being driven more by geopolitical activities than REAL inflation (crude oil down nearly $4 as I write this...peace talks in the buzz, not fiat Purchasing Power Parity news). Wheat is higher than it has been, after it too fell from still higher prices than we see now. I understand the implications of some of these commodities rising from lows and selling from highs. Take a look at housing prices. The single most expensive budgetary item has already been set back to prices seen a decade ago. It is all relative. At any time you take a snapshot, prices for some goods can be up while others down. I maintain that REAL inflation actually takes place during an economic recovery when the reserves are multiplied and expanded in the fiat velocity machine. Look back to the late 70's and early 80's. Buying a house for $30k was a lot and few people made $100k+. A few short years later home prices were multiples higher, just like incomes.

Account balance increases by the Fed and digitally inserted to a bank's reserve by itself does not cause inflation. All else being equal, there has to be more fiat in circulation chasing the same goods. Currently, there is actually LESS supply of fiat- Just ask the 20% of the US population that can't scrape up more than a few food stamps if they are living with more or less money than a few years ago when McMansions were given away by the banks to anyone who could legally buy a house then turn around and cash out enough to buy a stable full of fine European imported performance cars. No wonder Gov't Motors went broke. Who wanted a Chevy Cavalier (The car you knew America could build) when you could sign and drive off in a new Bentley Continental GTC? Try doing that today.

[Jonflyfish]

In order to have real inflation, money supply must be expanded. Velocity of bank reserves must be in motion. I do not see that happening now, nor anytime in the near future. Any "money printing" has simply been shoring up the balance sheets at the banks, NOT lining the pockets of the commoner. Until that happens, you can kiss the "wheelbarrow full of paper for a loaf of bread" concept goodbye. It will happen later, not in the near future. Unless you feel otherwise, please send your wheelbarrow full of FRN's to me. I'll make you the best tasting bread you'll ever eat in return.

I like this! But alas, all my wheelbarrows are full of copper.. kind of hard on the dental work.

Hoard, Anytime those wheelies get to be too much, I'll open a bakery just for you!

[68Camaro]

Wow. What can I say... If you really beleive this stuff, then we'll just have to agree to disagree, as I'm sure nothing I would say would convince you otherwise.

Yes. Fuel up, food up. Neither at all time highs. You seem to be comparing price to recent lows. Gas has been higher (than it was after it crumbled from all time highs) but as we see today, the petroleum market is being driven more by geopolitical activities than REAL inflation (crude oil down nearly $4 as I write this...peace talks in the buzz, not fiat Purchasing Power Parity news). Wheat is higher than it has been, after it too fell from still higher prices than we see now. I understand the implications of some of these commodities rising from lows and selling from highs. Take a look at housing prices. The single most expensive budgetary item has already been set back to prices seen a decade ago. It is all relative. At any time you take a snapshot, prices for some goods can be up while others down. I maintain that REAL inflation actually takes place during an economic recovery when the reserves are multiplied and expanded in the fiat velocity machine. Look back to the late 70's and early 80's. Buying a house for $30k was a lot and few people made $100k+. A few short years later home prices were multiples higher, just like incomes.

Account balance increases by the Fed and digitally inserted to a bank's reserve by itself does not cause inflation. All else being equal, there has to be more fiat in circulation chasing the same goods. Currently, there is actually LESS supply of fiat- Just ask the 20% of the US population that can't scrape up more than a few food stamps if they are living with more or less money than a few years ago when McMansions were given away by the banks to anyone who could legally buy a house then turn around and cash out enough to buy a stable full of fine European imported performance cars. No wonder Gov't Motors went broke. Who wanted a Chevy Cavalier (The car you knew America could build) when you could sign and drive off in a new Bentley Continental GTC? Try doing that today.

[Jonflyfish]

Wow. What can I say... If you really beleive this stuff, then we'll just have to agree to disagree, as I'm sure nothing I would say would convince you otherwise.

Yes. Fuel up, food up. Neither at all time highs. You seem to be comparing price to recent lows. Gas has been higher (than it was after it crumbled from all time highs) but as we see today, the petroleum market is being driven more by geopolitical activities than REAL inflation (crude oil down nearly $4 as I write this...peace talks in the buzz, not fiat Purchasing Power Parity news). Wheat is higher than it has been, after it too fell from still higher prices than we see now. I understand the implications of some of these commodities rising from lows and selling from highs. Take a look at housing prices. The single most expensive budgetary item has already been set back to prices seen a decade ago. It is all relative. At any time you take a snapshot, prices for some goods can be up while others down. I maintain that REAL inflation actually takes place during an economic recovery when the reserves are multiplied and expanded in the fiat velocity machine. Look back to the late 70's and early 80's. Buying a house for $30k was a lot and few people made $100k+. A few short years later home prices were multiples higher, just like incomes.

Account balance increases by the Fed and digitally inserted to a bank's reserve by itself does not cause inflation. All else being equal, there has to be more fiat in circulation chasing the same goods. Currently, there is actually LESS supply of fiat- Just ask the 20% of the US population that can't scrape up more than a few food stamps if they are living with more or less money than a few years ago when McMansions were given away by the banks to anyone who could legally buy a house then turn around and cash out enough to buy a stable full of fine European imported performance cars. No wonder Gov't Motors went broke. Who wanted a Chevy Cavalier (The car you knew America could build) when you could sign and drive off in a new Bentley Continental GTC? Try doing that today.

If I really believe what? Did I say anything inaccurate? I am just a humble front line grunt. If you care to opine, I am all ears.

[68Camaro]

[Well, can't seem to get the list code to work...]

We're looking at seemingly the same data, but seeing different things. We're on different planets. But I'll spend a few more minutes on it.

[list=]
[*]Not at all times highs... - Huh. Well you can cherry pick individual items and say (for the moment) that they aren't at their all-time highs, but if you look at overall costs, it's going up overall, and big time. Nearing double-digits, now, and predicted to soon be past that. (Not in the government stats, but they have been corrupted to make it look artficially low.) It's in the news. It's in my pocket book. I see it in menus, and the grocery store final bill, in my power bill. I I see it everywhere. I hear people complaining about it. Any that deny this are just drinking the government kool-aid.[/*]
[*] look at housing prices. The single most expensive budgetary item has already been set back to prices seen a decade ago. Really? Wow. I'm stunned. The cost to me personally to have my housing "reduced" in price was $300,000. That's how much I lost, literally, during this mess. That's a form of inflation. Believe me, I'd rather have the $300k and the higher payment. That millions of Americans have chosen to walk out on their debts and pile on the government doesn't make it less real. That's a real form of inflation.[/*]
[*]It is all relative. No, it's not.[/*]
[*]Currently, there is actually LESS supply of fiat- The Fed is taking hundreds of billions in T-bills off the market. That money is going somewhere. It's not just pretend money sitting on balance sheets, fat though they may be. It's basic economics, and the very definition of inflation.[/*]
[*]No wonder Gov't Motors went broke. This is almost off-topic, but GM has been mis-managed for at least 50 years, and has been teetering on bankruptcy for at least 30 years.[/*]
[/list]

[Jonflyfish]

We are certainly on the same planet. The difference is that the markets do not feel emotion. I have replied where you see ***

[quote="68Camaro"][Well, can't seem to get the list code to work...]

We're looking at seemingly the same data, but seeing different things. We're on different planets. But I'll spend a few more minutes on it.

[list=]
[*]Not at all times highs... - Huh. Well you can cherry pick individual items and say (for the moment) that they aren't at their all-time highs, but if you look at overall costs, it's going up overall, and big time. ***You mentioned wheat and petro doubling from the lows. That is not cherry picking. These lows came after higher prices than we see now. I am not saying that prices can't or won't go higher. In fact, in a fiat world, inflation is one of the only guarantees.*** Nearing double-digits, now, and predicted to soon be past that. (Not in the government stats, but they have been corrupted to make it look artficially low.)*** Predictions are worthless. The future is entirely unknowable. A few years in the markets and you'll hear more predictions than you care to entertain. None of which can consistently tell you how much of what to buy or sell and when to take action. Any single prediction that comes true in those terms is no different than a blind chicken that every now and then finds an ear of corn.*** It's in the news. It's in my pocket book. I see it in menus, and the grocery store final bill, in my power bill. I I see it everywhere. I hear people complaining about it. Any that deny this are just drinking the government kool-aid.[/*] *** Everyone has an opinion. I prefer to stick to the facts***
[*] look at housing prices. The single most expensive budgetary item has already been set back to prices seen a decade ago. Really? Wow. I'm stunned. The cost to me personally to have my housing "reduced" in price was $300,000.*** A reduction in price is purely deflation. While I can empathize with your personal loss, the market does not have emotion. Someone else buying that house bought something that was more affordable than it was when the price was $300k more expensive. Housing is the largest component of the CPI. That by itself has kept the Fed's measure of inflation low.*** That's how much I lost, literally, during this mess. That's a form of inflation. Believe me, I'd rather have the $300k and the higher payment. That millions of Americans have chosen to walk out on their debts and pile on the government doesn't make it less real. That's a real form of inflation.[/*]*** I personally know that many of those millions of Americans that are walking, or have walked away from their obligations also received the benefit of the difference in the current value vs a higher value. Millions either flipped or refinanced the homes and took (and spent) the $100k's on any number of self indulgences. I know this because I was part of five people who grew one of the largest independent wholesale mortgage companies in the nation from a few $million in production to several $billion, making the INC #2 then #1 fastest growing company in finance***
[*]It is all relative. No, it's not.[/*] *** In the markets, declining prices is deflation and rising prices is inflation. Choosing to decide what inflation is based on which side you gained from and which you lost from in the markets is all personally relative.***
[*]Currently, there is actually LESS supply of fiat- The Fed is taking hundreds of billions in T-bills off the market. That money is going somewhere. It's not just pretend money sitting on balance sheets, fat though they may be. It's basic economics, and the very definition of inflation.[/*]*** The Fed buying treasuries in the open market is simply paying the principal to those who hold the debt. If those treasuries mature, the holder gets par. The Fed is operating in the open market. Consider that the Treasury issues the debt and the Fed is buying in the open market. Make no mistake, the primary dealers are buying then flipping the paper in the open market to the Fed. The bid to cover ratio and the POMO cusip listings fully reveal that this is what is happening. The funds are going back to the primary dealers. This activity strengthens the banks and does not create any significant monetary base differential. This activity is, in part, how the banks have increased their excess reserves. The banks have been recapitalized through several conduits, POMO being just one of them. The monetary base money supply has actually shrunk. The wealth of a few was increased at a time when many lost a lot of wealth in various markets. That money that was floating and gushing around with the loosest and easiest access in modern history has seemingly vanished, leaving more folks unemployed and more people struggling to survive with food stamps than we have seen in decades. Access to money has been tight, very tight. Tier one banks have "made" many $billions while demand and access top credit has been low and tight.
This is where people hear about a recovery but do not see or feel it. Soon enough, however, the gearing will begin afresh and the velocity of the reserves will come alive and then you will see prices rise, a lot. This is what you are "hearing" in the news. All things being equal, this does not make people wealthier, as there will be more fiat chasing the same resources. However, it does present an opportunity for capitalists to carpe diem.*** ...[/list]

Imagine we have fully exhausted this topic. I take no offense in constructive discussion and would hope you feel the same. I hope and wish the best of success to you.

Cheers

[neilgin1]

Everything that is happenings in the markets, Main Streets, the Mid East....everything is all related to peak oil.

We cannot sustain life as we know it, on a world built on hydrocarbons.

http://www.youtube.com/watch?v=WAyHIOg5aHk "Collapse Trailer"

http://www.youtube.com/watch?v=N265btig ... re=related "Collapse (1 of 9)

[neilgin1]

Jonny, fly fisher,

NICE trade bud. You sure do got balls of steel. You remind me of some of my ole pals. that sure was a good trade though. Now don't tell me, you weren't sweating it...cmon! (lolz)...and the way you did an inverted pyramid was ultra risky, but hey, thats the name of the game, right?...i really am happy for you. i was always a spreader, grains, meats and crude, and intermediate term, meaning i would work into a position over the course of months, etc. i was TERRIBLE as a scalper, learned that way back in the 80's, so i started spreading, very fond of old/new crop Corn, fond of spreading wheat, Chi vs KC/Minn and front and back spreading Crude, anywhere from "1 piece to 6 piece" Crude spreads ( "6 piece= Jun vs Dec)

in the mid aughts, 04 i think, i overtraded Crude and got blown out something bad, and realized i had enough.....one realizes this when they contemplate eating a pistol, which is no good. so i went from wealth accumulation to wealth preservation, hence physical silver purchases, but i sure do love hearing the exploits of my colleagues, which includes you.

May God grace your decisions, and bless your purse, remember those who lack in resource and bless them in charity, your friend, neil

ps......we're still headed to $75 and then to $125 the ounce.....lol

[Jonflyfish]

The point of the thread is to illustrate that when euphoria is at it's highest, people are fully complacent and deny any of the risks....then capitulation happens and the floor gets ripped out and the negative feedback loop ensues.

[68Camaro]

The capitulation phase certainly is fascinating to watch.... even if I have a dog in the fight.