This three-way conversation between "Blogger Extraordinaire" Mish Shedlock in the US and private investors Erik Townsend and Michael Hampton in Hong Kong cuts through the fog surrounding the deflation versus hyperinflation debate. Mish and Mike update their mostly accurate forecasts for 2010 ( Link: http://tinyurl.com/mishmike-F2010 ), and Erik T. chips in with some key demographic challenges facing the US. The three discuss market sentiment, the Hindenburg Omen, and the arguments for hyperinflation from Gonzalo Lira and Marc Faber. Ultimately, it may come down to who is elected to Congress in the November elections, and not the actions of the Federal Reserve.
There is a thread about this podcast on GEI: http://tinyurl.com/GEI-hyper10
Mish Shedlock's Blog can be found here: http://globaleconomicanalysis.blogspot.com/
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12 responses so far ↓
Gonzalo Lira // Aug 31, 2010 at 1:58 pm
Thank you for your kind and prominent references to me on your show.
Didn’t care much how your guests mischaracterized my positions.
I would be happy to discuss—on air—any views you’d care to ask me about.
Do read my blog, to see if I’m off my rocker or not. If you think I’m not totally foolish or insane, do e-mail.
All the best,
GL
globaledge // Aug 31, 2010 at 7:29 pm
There is a very active discussion thread about this podcast on GEI: http://tinyurl.com/GEI-hyper10
Wendy T // Aug 31, 2010 at 7:33 pm
Excellent discussion. Thanks. I’m not well-versed in finance or fiscal or monetary macro-economics, so when I read the Gonzalo Lira article on hyperinflation, I was intrigued by his definition of hyperinflation as a consequence of people wanting to unload currency in favor of more tangible stores of value. I wondered if his scenario might be plausible, although it seemed pretty simplistic and based on some questionable assumptions. Checking out his bio, I saw nothing to suggest he had any expertise in the field he was writing about. I trust Mish though, having found my way to his site from www.chrismartenson.com, and if Erik Townsend is the same Erik who donated a great deal of time and money to CM, then he’s got my trust as well.
Your talk was very enlightening.
Bob // Sep 11, 2010 at 9:33 pm
@Wendy. Read FOFOA blog. It explains a lot about the hyperinflation scenario.
http://fofoa.blogspot.com/2010/09/just-another-hyperinflation-post.html
sbenard // Sep 11, 2010 at 11:39 pm
Good interview. I especially thought Mish’ argument about being too US-centric was a good one. Despite that, he grossly misrepresented Lira’s hyperinflationary arguments. He was also incredibly condescending about it. He created a straw man and then not only rebutted, but derided that straw man. Very sad! This left me feeling far less believing of anything Mish says, despite that I have read his blog almost every day.
LOL! // Sep 12, 2010 at 12:46 am
WENDY, you trust MISH? He got the market direction completely wrong and missed a hell of a surge in the markets after the crash! His timing and calls are just awful. Do you really trust him? Did you check out Sitka’s returns compared to just the S&P Index. You ARE naive. I think the guy who lived through hyperinflation is the guy to trust, not the armchair economist, don’t you? Defaltionists have been wrong for 13 years! Even Prechter admits that. I hope you do some research across sites and history and keep an open mind!
LOL! // Sep 12, 2010 at 12:48 am
Deflationists leave out inflation! Look at the price of health, coffee, soybeans, toothpaste. See that Tokyo and Osaka are the mosts expensive cities in the world. Asset deflation and deflation are 2 different things.
Bearster // Sep 12, 2010 at 1:40 am
Silly season is right. Michael’s logic on a rally post0-election fits this description.
He says that by definition, the majority will have its way in the election (true) therefore the majority of stock market participants will be happy with the result (false).
A majority of voters is not the same as the majority controlling interest in stocks, nor more importantly, the marginal stock market participants.
What percentage of voters pay no taxes? I assume none of the non-taxpaying voters hold stocks or will be buying them any time soon?
YooDman // Sep 12, 2010 at 4:17 am
Mish, yoo are d man! A well rounded, global view…politically, economically, and with a lot practicality. Always a fan.
jojo // Sep 12, 2010 at 10:47 pm
Mish, with his myopic view of history and condescending tone, comes across as very threatened by Lira’s views. He must sense that Lira makes much more sense, otherwise, he wouldn’t have been so personal in the attack. This is the first I’ve heard directly from Mish, and certainly have no desire to hear more in the future.
Shelby Moore // Sep 14, 2010 at 11:13 am
Starting about 14 minutes into the interview, I strongly agree with Erik and Mish that the typical hyper-inflation that Lira experienced in Chile, is not possible, because we are in period where retiring westerners will need to sell assets, as the jobs have all been outsourced and they are retiring any way. Yet we have simultaneously price inflation in basic necessities which will exacerbate because of the perpetual declining interest rates of deficits in the west. There won’t be some moment where westerners suddenly abandon the dollar and rush into commodities, because they don’t have any cash. They are just trying to stay above water, by selling off things step-by-step to keep up with all the inflation (or drop in real wages which is the same thing).
What Mish fails to grasp is this duality of deflation and inflation and what is causing it.
I have written extensively about this, especially focusing the issues well in the past few weeks of my writings.
1) Public debt is increasing offsetting the drop in private debt. The public sector and insiders are cannibalizing the private sector. Thus we will get increasing inflation as the private sector supply craters. Low capacity utilization is a symptom of this, as the private sector simply can’t get sufficient return on capital. Mish misinterprets this as meaning we have an oversupply. SGS price inflation metrics (and similars ones in UK, etc) prove this is not the case. We have oversupply in unnecessary things such as housing, manufactured goods, but not in basic necessities such as food, energy, commodities.
2) As interest rates half, deficits can double, and debt service doesn’t increase (and fails as a % of total debt!). This means that westerners can continue to write themselves a blank check indefinitely at the federal level to fund the promises. Of course, this is highly inflationary for basic necessities and deflationary for business.
3) I could go on and on, but just go read my writings. We are in a death debt trap spiral for western civilization. There is no way to get off the hamster wheel. It will end in massive rationing, fascism, death, war, etc.
4) I urge you to read Peter Thiel’s article (founder of Paypal), which is linked on my site. It has amazing insight into the battle over good globalization versus the NWO top-down scenario that we seem to be headed.
Folks this is real bad. Much worse than Mish and Erik realize.
This is not deflation and it is not hyper-inflation.
I also made 2 comments on the Lira interview which explain much more about my logic:
http://globaledge.podbean.com/2010/09/10/the-trigger-for-a-hyperinflationary-shock/#comment-418391 http://globaledge.podbean.com/2010/09/10/the-trigger-for-a-hyperinflationary-shock/#comment-418613
Shelby Moore // Sep 14, 2010 at 1:36 pm
Specifically why hyper-inflation can’t happen soon:
http://goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-435.htm#3572
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