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Posts Tagged ‘inflation’

There’s a good piece on Seeking Alpha today on the prospects for global commodity appreciation if and when the Chinese Yuan starts appreciation vs. the US dollar.

At the same time, there’s also a sentiment of unease about inflation given the amount of new currency created in the wake of the financial crisis but it puzzles some that this hasn’t kicked in yet. Also from Seeking Alpha:

Logic dictates that we should all be gearing up for inflation, now, but the data does not lie and I can pull the most aggressive data I want and it shows ultra low inflation rates, which is scary, frankly. With the massive printing and monetization of debt that we have seen over the past 2 years, we should see some inflationary pressure, somewhere, but nothing.

There’s already an obvious relation between the two ideas, but we might have to rely on Kedrosky to hammer the point. In order to keep the Yuan stable, China has been buying greater and greater amounts of US Dollars over the years.

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Ergo: the biggest reason why inflation hasn’t hit, is because all the new dollars are in China.

Ergo: if the Yuan appreciates, dollar drops, inflation hits, interest rates rise,

recession worsens??

Wait, I thought the Yuan thing was supposed to be a good thing?

“Sent from my BlackBerry® wireless handheld”

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Eerie timing right after our last post on Zimbabwe, this story appeared on the Telegraph yesterday about how gold has been climbing in recent months due to fears that the bailouts will result in the debasement of money and hyperinflation.

In dollar terms, gold is at a seven-month high of $964. This is below last spring’s peak of $1,030 but the circumstances today are radically different. The dollar itself has become a safe haven as the crisis goes from bad to worse – if only because it is the currency of a unified and powerful nation with institutions that have been tested over time. It is not yet clear how well the eurozone’s 16-strong bloc of disparate states will respond to extreme stress. The euro dived two cents to $1.26 against the dollar, threatening to break below a 24-year upward trend line.

Crucially, gold has decoupled from oil and base metals, finding once again its ancient role as a store of wealth in dangerous times.

Is this tick-up in gold price a reflection of reality, or just the fears and anticipation of people and investors? Then again, maybe the fears ARE the reality.

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In Zimbabwe, where money has been reduced to worthless paper due to hyperinflation, citizens are forced to panning for gold to pay for bread to stave off hunger.

Hyperinflation is an economic phenomenon, the root of which can be complex–but generally blamed on an increase in money supply, which consequently reduces the value of the money in stock. In Zimbabwe, as of 2008, the inflation rate is estimated at 516,000,000,000,000,000,000% (516 quintillion).

The sordid history of how great increases in money supply led to hyperinflation is chronicled in the wiki entry for Hyperinflation In Zimbabwe, which started with the government printing new currency to pay off international debts in 2006.

We previously featured Glenn Beck’s hockey stick presentation of potential US inflation. Are the US and European bailouts simply another Zimbabwe?

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Doing his impression of Al Gore’s Inconvenient Truth, journalist Glenn Beck illustrates the looming danger of hyperinflation due to the ongoing government bailouts:

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Watch this video if you would want to understand how the ‘gold standard’ was replaced by the U.S. dollar. U.S. dollars are not anymore backed by gold. The U.S. can theoretically print as much dollars it wants which will of course cause inflation by lowering the value of the dollar.

This video I got from youtube is biased towards returning the gold standard. See for yourself if you agree.

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Remember the guy who was right on the housing bubble? The guy who predicted this crisis as far as two years ago. Until recently he was basically correct on just about everything except two things. He claimed gold would rise and the dollar will crash. Both had not happened until now. 

Here he is again, really excited that his last two predictions may really come true. If this guy is right, the United States economy is in deep trouble to say the very least.

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