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Inflation, Deflation, Forecasting, Timing.



June 02, 2010 – Comments (4)

Ok, so most of you know I'm a believer of Inflation. If you keep printing money, it devalues money. It's that simple.

So far the US has managed to keep the perception of inflation to a minimum through government manipulation of the market and making sure to only give the newly printed money to banks that will hoard it and thus slow the velocity of money. Even this plan was starting to falter though, as precious metals where rising faster than the market until the last couple of months. The US decided it could stand pat at this point and wait for the market to confuse inflation with growth as it's done so many times in the past. The problem is that the rest of the globe is starting to show signs that their own inflation is not growth. The one thing that the US was counting on was a devalued dollar making them more competitive in the global marketplace.  The problem is that the rest of the globe fears the other currencies more than the dollar at this point. This is going to cause deflationary pressure on the dollar. Deflationary pressure means that the government has to try to re-inflate again. The problem is that the American public is a little upset that the first round of stimulus went to banks and not to job creation. Voters without jobs do not usually re-elect and we are getting close to election time again. Deflation is un-acceptable to the government, because not only has our government borrowed too much money, but our voters did so as well, with goverment sponsorship.


So my forecast is a big deflationary moment followed by panic. When panic hits the economy, the government calls in Ben Bernanke. Not the real Ben Bernanke, but 1 of the 5 clones of Ben made by the "Dolly the Sheep" people. The real Ben Bernanke is locked in a cavern deep inside a mountain in the Netherlands surrounded by seeds we are saving in case of a global holocaust. 


The thing I can figure out is the timing.  this could happen at any time in the next couple of years. This time the money has to be handed directly to the voters though. Will there be an increase in the velocity of money?  Well we are talking about consumers that increased their discretionary spending because they are no longer making payments on houses that the are still living in, because the government doesn't want the foreclosure numbers to look too bad.


Last but not least, Friday is National Doughnut Day, try not to subdue your inner "Homer Simpson"

Send Lawyers, Guns, and Money,




4 Comments – Post Your Own

#1) On June 03, 2010 at 1:08 AM, starbucks4ever (64.43) wrote:

Yes, inflation will become a problem in 2011. But this year will see zero inflation. Cheap gasoline cancels out price increases.

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#2) On June 03, 2010 at 1:44 AM, Starfirenv (< 20) wrote:

Chris- Lawyers, guns and money won't get you past the Warewolves of London. Silver bullets!  Always enjoy your stuff. Rec. Regards.

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#3) On June 03, 2010 at 1:45 AM, 1315623493 wrote:

My model say deflation, so to me, it's quantitatively confirmed. Low interest rates will continue if we are still at zero inflation.

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#4) On June 03, 2010 at 1:33 PM, Melaschasm (< 20) wrote:

Significant deflation?  Nah.  Ben and the Fed have promised to print as much money as it takes to avoid deflation.  Since the Fed has historically favored inflation, I expect they will keep their promise. 

Unfortunately, when they print money, they give it to those who are politically connected, and thus it is the politically connected that will benefit, to the harm of regular people.

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