Next time I do a podcast like this, I will edit out the points where the other party tried to interrupt my comments, since some think that means I was not letting him talk.

If you look around the web, and on podbean, you will see that I have done far more podcasts that GL, and my comments and views have normally been regarded well. If you are not interested, you do not need to listen.

heheheh

GOD hath a sense of humor

http://goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-435.htm#3572

http://goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-435.htm#3572

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

I have covered this extensively in my writings. I have even debated both Mish and Denninger and most of the major writers.

Read my writings before you go any further.

Again…I went back to the 1930’s checked the ol prices. For only a few years oil went down in price but in 1933 up to 1938 the price went higher. That was a wake up call for me. I thought the price of oil declined during a depression. And this is when the US had a 100/1 EROI. That means it only cost 1 barrel of oil to produce 100 for market. The US oil production EROI in 2000 was 11/1. A significant drop indeed. I would imagine the EROI presently is below 10/1.

This is what most economists fail to recognize. The US TREASURY MARKET will collapse because the US ECONOMY & US GOVT does not have the physical assets to back these Treasuries into the future.

I gather we are going to have to wait this one out to see who was correct. But even if we had huge HAIRCUT…it does nothing to change the fact that the US SUBURBAN ECONOMY is over based on functioning on CHEAP OIL. Those days are over. And if you factor in how the INTEREST RATE SWAPS and DERIVATIVES have kept money out of physical commodities…when the PAPER PONZI MARKETS IMPLODE…money will be flowing into COMMODITES like never seen before.

Somehow this battle is made more interesting by the fact that both write good commentary, and both have a strong interest in promoting their Blogs. Does GEI somehow benefit from the attention that their public feud is generating? Potentially, but I can see some downside in how this is developing too. For example, the heat being generated by this thing is getting more attention than the light which the debate might be shed on the important Hyperinflation vs Deflation debate.

These approaches should not surprise me. My own experience with this episode was the people are much more interested in appearances than in content. For example, I had several comments that I should have let GL “talk more”. Why? Because I left in the podcast several parts where he tried to interrupt me when I was speaking, and I also interrupted him a few times. Gonzalo writes well, and he speaks well enough, but it isn’t easy to make a 45 minute podcast with him. What people do not know is that I spoke with Gonzalo for several hours before the podcast, and I recorded over 60+ minutes of podcast. If I had not used the technique that I did, the podcast would have been 2 hours long, or the material might not have been usable at all. (I know, I was there, and I spent almost three hours editing it down. Next time, I will know better, and if I have similar material, I will edit out the “interrupts.” Listen to the interview with Mish and Erik T., if you want to know what a smoother and easier interview sounds like. Or try doing the interview yourself.)

http://www.marketoracle.co.uk/Article22482.html#comment94490

http://goldwetrust.up-with.com/economics-f4/inflation-or-deflation-t9-420.htm#3507

We have +10% SGS CPI now, coupled with asset price deflation, so we already have a form of hyper-inflation:

http://www.marketoracle.co.uk/Article16212.html

You are both making very valid points.

I think gonzalo’s framework that a credit deflationary environment increases the risk of a hyperinflationary event has a lot of merit.

But I think that Michael/Mish counter-argument to the trigger being a sudden surge in oil prices is also valid. Physical oil cannot be easily stored so such a spike would only be temporary and could not be sufficient to cause a run on treasuries.

I think for a trigger we need to look more in the direction of Chinese creditors and Gold.

But I don’t think it is, for now, in the interest of China to start such a run on treasuries. China gains much more by reducing slowly its treasury holdings (which they have been doing for the last 11 months) and instead buying Gold, farmland in Africa, commodties, mining companies etc… than by dumping all its treasuries at once and causing a run on the dollar.

Not only do they get a far larger quantity of hard assets but also they can maintain their #1 zombie customer alive while developing their domestic market (and military arsenal) with the proceeds of such business.

Which doesn’t mean that eventually (maybe 6 to 10 years down the road) once they have built sufficient reserves in hard assets, developped their domestic market, increased their military arsenal and that their Zombie customer isn’t profitable enough ecause of the disastrous impact of debt deflation on the US consumer, bail out from the ponzi and just dump what they have left of treasuries and cause a final run on the dollar.

But as Michael has well pointed out, many other scenarios are possible…

Thanks again for an insightful podcast.

Let’s leave it at this: Hyperinflation would damage many in the US: Suburbanites, property owners, and banks and the financial elites too. Don’t you think they will try to stop an event unfolding which will damage their wealth and power? Sure, we have seen little talk of haircuts, etc so far, but lets at least wait until the election is over and the end of the year is approaching, and we can have the discussion again.

I am not saying it will work, I am saying it “may work”, and is a scenario that needs to be taken seriously. I am not alone in this. Whether you think Mish is saying the same thing or not, there are others. For instance, Laurence J Kotlikoff on this week’s FS podcast is suggesting something similar. Sure, it will take a big change in the apparent political will that we are seeing now in the US. Nevertheless, it is the only “intelligent alternative” that we have, and we may wind up with it when the politicians try the easy choices first.

You are right, a haircut can be thought of as a partial default. But a result that is negotiated between two mostly-willing parties, has a vastly different impact that a sudden refusal to stop making any debt payments at all. Just look at history - we’ve seen loads of these conclusions to excessive debt crises in the past, and they play out differently than shock defaults.

It was a leveraged take down with the help of the FEDS left and right hands…and that was GOLDMAN SACHS and JP MORGAN.

It is amazing to me that INTEREST RATE SWAPS and the rest of the DERIVATIVES aren’t included in the HYPERINFLATIONARY EVENT.

Anyone who thinks HAIRCUTS are going to solve the problem need to check themselves into the closest shrink.

LIRA spells it out correctly. US TREASURIES are a PAPER PONZI SCHEME that the United States SUBURBAN LEECH and SPEND ECONOMY will not be able to payback. Our economy runs on cheap oil…which is now over.

I am suprised that most economists…especially the AUSTRIAN SCHOOLERS don’t factor in the falling EROI of Oil and Natural Gas. There is no way the USA will pull itself out of this HYPERINFLATIONARY DEPRESSION. We can’t even go back to manufacturing economy as the TRILLIONS of DOLLARS in investments have made this worthless SUBURBAN LEECH and SPEND ECONOMY…we basically blew our wad on a worthless deadend suburban economy.

This is the very reason why we will have HYPERINFLATION. Mish and Denniger and forecasting economic theory in a vacuum. They will EAT CROW when GOLD heads to $5000 and up and SILVER hits over $100.