Category Archives: Deflation/Inflation

Deflation or Inflation?

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At the prodding of an NFTRH subscriber who was combing through old issues, I went back and read NFTRH 7, from November of 2008 and was struck by how things have really not changed in the last 6 years of non-stop inflationary policy; they have intensified and gone global, but the mechanics have not changed.

The current inflation operation is failing world-wide, with the US holding out for now. As pertains to the gold and gold mining case mentioned in the article below (as we got hyper bullish in Q4 2008), things are moving much more slowly now. The current backdrop is a different animal than the 2008 deflationary impulse, but its potential is to much more wide-ranging and ultimately destructive. (more…)

Is Inflation Over Sold?

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First, for all you right minded wording detectives out there, you are absolutely right… inflation is not rising prices and deflation is not dropping prices. Also, deflation is not two measures of a heavily manipulated bond market (chart 1) dropping impulsively. But for the sake of argument, let’s realize that Main Street does indeed call $4 regular at the pump “inflation” and every several years when a scare crops up they call dropping stocks and house prices “deflation”.

Here are some pictures of an over sold ‘inflation’ story, which put another way, is an over bought ‘deflation’ story.

TIP vs. TLT (inflation protected vs. regular long-term Treasuries), the indicator that did indeed give us the heads up on a coming implosion of inflation expectations long ago, is burrowing southward in what looks like a Waterfall decline (the opposite of a parabolic blow off ala Silver 2011, at the height of the last inflationary blow out). (more…)

Deflation!

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soda.jerkNote:  This is somewhat personal and subjective to biiwii.com and nftrh.com, but if any venue can take a little off the beaten path content, I figure Slope can.  Thanks in advance to Tim if he should choose to publish it.

Well, now that the title has hopefully gotten your attention I’d like to talk about the ‘d’ and ‘i’ words that so many financial types – myself included – throw around so often. This is due to a reader/subscriber KR’s aggravation at my use of the word deflation, which he had thought was meant sarcastically, but then came to find out I am serious when I use it.

First I want to note that I seem to have been pissing everyone off lately, gold bugs (one of which I am) and gold bears in particular. That is due to my writing style being one where if I’ve got something to say, I say it. Sometimes that’s bad for business, as I can get a little heavy handed. (more…)

Draghi Speaks the Truth

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Draghi Speaks the Truth; ECB Will ‘Do What it Must’

Words are important. This is not just a headline, it is a reality…

Draghi says ECB will ‘do what it must’ on asset buying to lift inflation

Not ‘do what it thinks would be the best course for the European economy’, not ‘choose the path of least resistance in guiding the financial system to recovery’… the ECB will DO WHAT IT MUST.

As I have written til I’m blue in the face for the last 10 years, we are in the age of ‘Inflation onDemand‘©, 24/7 and 365. “…do what it must”… let that sink in for a moment.

Japan is trying to kill the Yen, China is dropping interest rates and the world over we have a rolling inflationary operation that is little more than a game of Whack-a-Mole. BoJ popped up a couple weeks ago and now this one… (more…)

“It’s Inflation All the way, Baby!”

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The title’s quote is one of many eminently quotable messages I had the pleasure of receiving over a few years of contact with a late, great and a very interesting man* named Jonathan Auerbach, who headed a unique specialty (emerging and frontier markets) brokerage in NYC called Auerbach Grayson.

kabukiJon was an honest and ethical man. He was also a gold bug (in that descriptor’s highest form) who innately understood the Kabuki Dance that has been ongoing by monetary authorities since the ‘Age of Inflation onDemand‘ (what guest poster Bruno de Landevoisin calls the Monetized New Millenium) started its most intense and bald faced phase in 2000.

Yesterday the minutes were released from the last (FOMC) meeting of official interest rate manipulators and surprise surprise, they are found to be hand wringing about the strong dollar. A strong dollar is going to take direct aim at US manufacturing among other exporting businesses, after all. (more…)

Gold Miners and Inflation

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A constant struggle in writing about the precious metals is in trying to be clear about the differences between the gold stock sector and other sectors when it comes to inflation. That is because there are two types of bullish environments for gold stocks…

  1. The ‘play’, where all the inflatables rise with inflation expectations; this would be the ‘gold is silver is copper is oil is hogs is corn’ trade. This is the play where the inflation and commodity gurus tell you to buy resources to protect yourself from the US dollar crash that is going to happen any day now. A problem is that in this environment many resources often out perform gold, thus hurting miners’ fundamentals.
  2. The other is a longer trade or dare I say it, investment. This is where commodity prices are declining and the USD is firm. Gold is stronger than silver and the inflation oriented gold bugs get bearish because they can’t understand how gold will not go down with oil and indeed, inflation expectations.

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Deflationary Straw Man

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straw.manNo matter the debates over inflation vs. deflation, increasing employment vs. sound monetary policy or systemic health vs. fragility (and whatever else is flying around in Jackson Hole this week), the CPI marches onward and upward. That is the system and it is predicated on creating enough money out of thin air while inflation signals are (somehow) held at bay.

The Straw Man* in this argument lives in the idea that inflation is not always destructive, that inflation can be used for good and honed, massaged and targeted just right to achieve positive ends to defeat the curse of deflation that is surely just around the next corner. Currently, the Straw Man is supported by the reality of the moment, which includes long-term Treasury yields remaining in their long-term secular down trend.

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