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Inflation or Deflation?

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Inflation or Deflation? - Page 15 Empty Pumping up a bigger crash to come (final encore in boomer land)

Post  Shelby on Wed Apr 14, 2010 3:02 pm

Shelby wrote:Finally Hommel admits how bad it could get:

The silver price suppression scheme, and the resulting failure of paper money, and the resulting collapse of commerce and world trade risks sending the entire world into a severe depression that risks famine on a world scale unlike what has ever been seen before in world history, and could therefore cause the direct deaths of anywhere up to a third of all humans on earth, or even more.

Preparation for big changes in the global financial order. The craziness I see coming, outstrips the imagination. The federal debt is now more than annual GDP, and if all current retirement mandates are funded, then it will rise to several times GDP in coming decade or two. This means at double-digit interest rates (which is likely given rampant inflation needed to inflate away value of the debt), even 100% of GDP could not pay the interest on the national debt. This will cause increased borrowing, which will increase the national debt faster, which make it even worse than above statement. The only way out is to drastically reduce the lifestyle (including housing, etc), or to inflate away the value of the debt. Even 100% taxes won't solve the problem without doing one of those 2 actions. Thus we can be nearly certain that massive inflation is on the way. But this doesn't solve the problem, because it continually raises the quantity of the national debt. This would be an endless debt trap spiral with massive inflation that ends only with a MadMax outcome (or world war). You would have massive social unrest during this. The most sane option is for westerners to right now decrease their standard-of-living voluntarily and buy gold and silver. But this won't happen. Less than 1 in 1000 own gold, and many of them own it in IRAs or certificate forms, and the govt can steal of all this through taxation.

Note that is monetary inflation, combined with cost of manufacturing deflation. This is a wicked mix, and no country will be spared...

Consumer spending increasing because people are not paying their mortgages (also $8000 new home buyer credit, etc):,-So-The-Recovery-Is-About-Delinquency.html

Federal Deficits (as a % of GDP) are increasing 10% faster than GDP is, this means private sector GDP is imploding by -10% per year:

Folks that is already GREAT DEPRESSION in private sector, being levitated by bankers not calling in their loans yet.

When TPTB are ready, they are going to crash this sucker and going to see -20% fall out of the economy overnight at least. Actually with all the leverage, derivatives, etc, this can easily be -90% blow to the economy at the flip of a bankster lever, when they are ready:

Enjoy this final party while you can. Will it last into 2015? I feel we will see extreme rollercoaster ride, but we might just see the nations hold it together for another years, moving to very severe controls and massive monetary inflation and misallocation.

It is going to ugly if they hold it together that long, so either way, we are looking at forms of chaos not too far out...

Tompson sees TPTB core (Rothchilds) going to war against the nations' bonds soon:

Are you prepared for massive changes in global order?


Ray, you do not understand what is going on. China is a nation, on the aggregate it will suffer immensely. China's controlling elite know this and they are just maximizing their position. The old world bankers are playing the strengths and weaknesses and will continue to increase power.

It is not "he who holds the gold". It is "he who holds the gold, and does not hold 1.5 billion peasants liability". There is no way China will ever have as much gold per capita as the USA once had.

That time is finished, never to return again. We are in the final mopping up stages of the one world order, where gold can not be held by people any more. That is what this big shift will do by the end of it.

You do not seem to understand that China came to the party too late, and too debt in socialism debt. They can not undo 50 years of shooting themselves in the feet, with 2 decades of Yuan-pegged anti-capitalism.


In short, the Chinese elite are just pimping their population to the old european banksters. Communist party is nothing but a massive sheeple herding system. Pimps and their socialism sheeple whores. That is what world is coming to now.


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Inflation or Deflation? - Page 15 Empty Soros says much worse coming

Post  Shelby on Sat Apr 17, 2010 2:53 am


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Inflation or Deflation? - Page 15 Empty Global interest rate manipulation scam

Post  Shelby on Mon Apr 19, 2010 5:20 am

> Shelby wrote:
>> Tiny houses in Vancouver selling for over $1 million:
>> The point is there will be crash in the NorthWet eventually and housing
>> values will fall drastically to something more consumerate with their
>> value (pine trees are not expensive).
> Chinese money going in there. Maybe also some speculation post-Olympics.
> Vancouver is a BIG, international city. Too weird for me.

It is balloon that will pop, just as China will pop.

China tried to recover from decades of socialism (centralized mismanagment, misallocation; an experiement the USA is now trying), by trapping all their citizen's savings inside the country, by controlling all foreign exchange (Yuan exchanged to other currencies), and thus keeping their masses international purchasing power lower. This entrapment of personal savings (deposited at banks in China) was loaned at super low interest rates to factories and enabled their factories to undercut pricing and increase global market share of exports. So now we have too much supply of industrial production, at too low of prices. The free market pricing mechanism were killed by the centralized control over exchange rate. This has put the entire world in a state of misallocation of human resources (pricing). The result is too much production of things people do not need, as much as other things people need more. This paradigm lead to ultra-low interest rates in West, which fueled a misallocation in housing.

They had to sell 1000x more paper gold and silver (than physical metal), and write quadrillions in derivatives, to keep this global interest rate fraud scheme from busting earlier.

This is failing. We are in the last stages as the socialists all huddle together, printing more misallocation (money), so they can all go down to complete failure together.

That is what this is all about.


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Inflation or Deflation? - Page 15 Empty China is resisting the computer revolution

Post  Shelby on Wed Apr 21, 2010 5:31 pm

We can see it with their censorship of Google. Their resistance of technology which enables individuals to make their own free market decisions. I can even argue that China is causing the debt binge in the west and causing the resistance of the globe to adjust to the new technology revolution. China is holding everything back. China is feeding the boomer debt/entitlement addictions. Read my prior post.

We can see now the effects spreading globally with the recent expose on the secret global ACTA treaty negotiations. The state legislates when they have no solution to technology shift. Technology (nature, increase of entropy/free market of diverse actors) always wins!

Shelby wrote:If China is so great at technology, why did it produce capacitors that explode:

Also apparently you did not read the link I provided for crisismaven. It explained how China is rapidly wasting it's cash hoard. Essentially the capital moved from western debt addicts to China's central managers, and now wasted on increasing production beyond supply. The GDP numbers are lies (more like nominal GDP without the inflation adjustment).

Ray you don't understand the basic concept of economics, which is that the free market always wins (meaning no interference by central managers against individual opportunity cost). China is prime example of state misallocation. As I said, they are forcing all private capital to stay within the country. This is causing a massive misallocation globally and internally.

This will result in an epic global crash, and old world banksters have this planned out as a way to move the world to NWO.

Shelby wrote:here is the correct link for crisismaven blog on china:

Ray, if China is so good at making software, how come they have not produced any commercial success outside of China? Rather what you have is a captive audience, due to state censorship and the natural language barrier.

China is competing with slave labor. This worked for the Southern USA for a while too. It has worked for the banana republics too. And just look how backward these turned out to be, when the big shift came (e.g. end of slavery in south, or the plunge in sugar prices).

Ray the bottom line is that centralized economies NEVER outperform free market ones.

China is doing relatively better primarily because the rest of the world is becoming more centrally managed.

But the who world is headed into massive unemployment, because of factory automation. The future jobs are for the intellectual work. The designers, the engineers, etc. In short, the information revolution.

The USA is not suffering because of losing manufacturing jobs. The USA is suffering because the people got binged on debt.

Immigration is a good thing. It means a freer market. The most robust economy would be the one that has a completely open border.

Free markets always win. Centralized control always loses.

Shelby wrote:I will repeat again, that the loss of manufacturing is not what ails USA.

It is the inordinate rise in debt, that enabled Americans refuse to adjust to the new opportunity costs of the information revolution.

The highest value activity is not in making stone tools, plowing a farm, being a blacksmith, nor in a sweatshop. The current computer/information/software revolution is having effects similar to the labor replacing machines invented in the textile/industrial revolution. China's current centrally managed attempt to monopolize the dying industrial model, is the death throes of it's centralized communist political system!

Empires die when they don't adjust to labor-saving technology, read about Roman empire's preference for slave labor over technology:

Google for "ENTERING AN EPOCH OF SOCIAL REVOLUTION", then search for "
Search for "Every schoolbook
states that the industrial revolution brought down feudalism" in this document.

The Luddites resisted the textile and industrial revolution, but ultimately these labor replacing machines actually created more prosperity and higher employment!

Shelby wrote:Let me repeat what I have written in past, which is that manufacturing is becoming increasingly automated, and China is driving profit margins to near 0. This is the death throes of the industrial revolution. The profit is in the design/engineering of the products and machines to produce them.

Shelby wrote:The point is that China is operating at near 0 margins and this is why they used a faulty electrolyte in their capacitors.

They cut costs by destroying their own environment (just west did in our industrial revolution).

The problem is the industrial revolution was 100 years ago. China is too late, and the way they gain market share is by cutting costs and this is accomplished by trapping their capital inside the country and not letting it seek higher opportunity costs.

The fact that China can not allow unlimited access to information is proof enough.

Everyone knows that China produces inferior quality products. This will improve over time as they learn that people will pay more for quality, but the point I am making is this was not the economic incentive given to them.

The govt has basically given them free capital to produce at 0 profit margins, and so they careless about profit and care only about volume. It is all about pumping up their GDP and employment, as billions of people unemployed is main problem in China.

I told you this is a huge liability for China and it is the death of the industrial revolution, as margins are driven to near 0.

Shelby wrote:I know someone who does manufacturing in China. And he said (prior to 2007 crash) that manufacturers float on their suppliers' capital. They will refuse to pay for greater than 90 days. And they lie, cheat, and steal. I read an article yesterday, about how popular it is to work for state company, steal all their clients, then run your private company from your office at the public company. Then eventually leave the state company after some years, taking the clients with you.

The entire system is one of connections, favoritism, etc.. This is a failure oriented economic model. Study entropy and the free market.

Shelby wrote:The basic family values in China may be good, but there is one major thing missing. They do not demand freedom. Chinese have learned to co-exist with their lack of freedoms. But freedom is necessary for a free market and to prevent the massive misallocations that are happening now, which are going to drive China into the ground again.

The basic problem boils done to the people placing too much trust in the government and the communist system. In fact, they are quite proud now of their system and its recent accomplishments. They think the system is working for them, because their middle class is expanding. They don't see the massive leverage in real estate and their savings being wasted on over production of high volume, low quality goods and other misallocations (e.g. brand new cities with no one living in them, etc).

Shelby wrote:I have not subscribed to economic theory as taught in the institutions. Fortunately I was not a victim to that abuse of having to attend one of their indoctrination centers as you claim to. I am using fundamental theorems of physics, such as the 1856 law of thermodynamics, which states that the universe (a closed system by definition) is trending to maximum disorder.

If you look at the equations for entropy in any discipline, what you understand mathematically is that increasing disorder is correlated with increasing diversity of actors (increasing possibilities).

Thus any force which attempts to direct a mass of matter (e.g. a group of formerly independent decision makers being constricted by a central control), will fail eventually. These forces must act with exponential increase in order to counteract the opposing force of the direction of entropy in the universe. These exponential bursts of order, are local (closed systems) while the global system is acting upon them to break them down.

TPTB (the elite) can operate only within trends of entropy. They are currently aligned with the human nature that aspires to debt and to be taken care of (order provided) by a government authority. But this trend is an exponential order that ultimately leads to widespread failure for the entire world. This mathematically inevitable outcome of human nature was predicted 2000 years ago, as it was written down in Revelation.

China as an actor in this trend is already documented in Revelation as the red dragon. But I don't subscribe to the Biblical theories, rather just note when they correlate to physical science.

Napoleon was also a victim of his own exponential push for order, and so will follow all those elite who attempt to defy the trend of the universe.

China's elite know their system is failing. They don't care. They are milking it for maximum gain, and they have already sent all their children to Vancouver and will flee when the shit hits the fan.

Shelby wrote:I suspect the top level of TPTB are purposely aligning to the human nature trends that drive misallocation of capital and failure (e.g. desire for debt, desire for insurance, desire for order/govt, desire for laws other than natural laws). I think TPTB have tried to maximize this push for failure. China and West have been played off as symbiotic elements of maximizing this failure.

Out of this failure, will exist a huge belly of "useless eaters" and major problem for the world to feed them, because the misallocation of capital is going to drive massive shortages and widepread failure of economies.

This is a trend of society towards a world government. The Bible talks about this trend of human nature and explains that man can only remain free by "not being surety to a friend", "not choosing to have a govt" (1 Samuel 8), "no idoling things of this earth" (e.g. laws, govt, order).

At the same time this failure trend is occurring, there are zillion lights of new freedom occurring. Remember the exponential equation, "small things grow faster". A kid can double his net worth in an hour, buying a can of cold coke on a hot day, and selling it for double price at stop light.

Those who have studied this math and see the correlations to the wisdom in the Bible, will always be free. We understand the limitations of TPTB. We understand their weaknesses.

Shelby wrote:Chinese elite understand Ying and Yang, so they too understand very well that China can not rise up on the back of massive debt addiction in West. This was not a wise model of how to build a sustainable China. This was a model of how the elite could cash out and maximize the global failure necessary to bring about dependent class to drive the NWO.

Chris Laird wrote:China certainly is well aware that 60% of their economic growth in recent years is construction related. Did you know that? If China is popping a huge construction bubble that is 60% of their economy then why is everyone talking about using basic commodities as an investment haven? There is a difference between a haven and a speculation. Commodity markets are speculation markets right now. That makes them subject to wild price swings.

Shelby wrote:Coarse's Theorem is there are no externalities, only transactions costs. Nature will also route around any artificial barriers to maximum efficiency, the same way as a river will always route around a dam given enough time.

Coarse Theorem is just another way of stating the 1956 law of Thermodynamics that says the universe is always trending to maximum disorder.

If you don't understand these concepts, then you won't understand me or what I am writing about.

Shelby wrote:You speak of "largest" but you forget to divide by the population to get a "per capita" normalization.

And you wrote nothing which refutes the hard facts and economic realities of bubbles.

Where do you live? I've been living in Asia since 1994.

Marc Faber lives in Asia (has a beachfront home in Vietnam) and visits China regularly:

Marc Faber wrote:China Bubble?

Is China headed for a bubble? “For sure,” said Faber. “The symptoms are there. It is a bubble when something goes substantially above the trend, when there is excessive credit gross and when there is excessive speculation. All these elements are in China,” said Faber who predicted the Japan and NASDAQ bubble collapse.

“If everything is so great in China, why is the Chinese stock market lower today than it was in August in 2009?” he asked.

Shelby wrote:I am not disagreeing with Asia being a large mass of population with improving standards of living (wealth). No one can deny that trend. It is obvious to anyone here in Asia.

That is not the point! You are missing the point.

The point is that this growth is being mismanaged in such a way that there is going to massive failure and setbacks along the way. Just study the data and this is obvious too.

Shelby wrote:Why would you assume I have adopted Faber's logic about China's stock market? I can quote him and his reasons, without adopting his logic. Learn to not conflate, it is the enemy of rationality.

Still you fail to refute factually any of the arguments I made on this page. You just continue to repeat an subjective assumption that China does not have to obey the laws of nature.

Here is some data on flows:

What we can clearly see is the the rich are routing 60% of global trade through tax havens specifically to skim all the profit off and leave the misallocation of the current global mess to society.

Shelby wrote:Also your analogy of Ferrari to stock market pricing illustrates that you do not know the difference between a controlled action and an uncontrolled action.

The stock market is priced by the laws of nature, the Ferrari is controlled by one foot.

If you argue that China is holding back on their potential, I will agree, and due to the laws of nature, this means they are radically mispricing and mispricing has massive misallocation effects.

Ray can you not get it in your thick skull, that there is no way the communist party can control every effect and action from the mispricing they create from their controls? Wikipedia "Butterfly effect".

Puru Saxena wrote:A correction in China will occur when there is more monetary tightening, said Saxena. When this will happen? Saxena does not know. “One thing working in favor of Chinese assets is that China doesn’t allow the Chinese to invest overseas – so the money is all contained within the economy,” he said.

Shelby wrote:One human may be able to do something completely foolish and away from the trend of maximizing disorder (which is what nature is always doing on the big trend), but something which is an aggregate of a multitude of independent actors (humans, computers, processes, govts, etc) like a stock market is much less likely to move countertrend to nature's desired path, and in those cases where it is able to be so centrally controlled and manipulated, then you can be damn sure that nature is going to destroy it eventually. And this is what is going to happen to the centralizing efforts of the govt in China (and the symbiotic corruption of Wallstreet, suppression of gold&silver prices, etc). And the Chinese people will benefit immensely from the demise of their central authority.

Shelby wrote:1) Ray wrote:
"Therefore, even by your fuzzy logic this means that the foot controlling the Ferrari is also conforming to what you claim are the laws of nature."

2) Apparently you failed to read what I wrote:

Shelby wrote:
" human may be able to do something completely foolish and away from the trend of maximizing disorder (which is what nature is always doing on the big trend), but something which is an aggregate of a multitude of independent actors (humans, computers, processes, govts, etc) like a stock market is much less likely to move countertrend to nature's desired path, and in those cases where it is able to be so centrally controlled and manipulated, then you can be damn sure that nature is going to destroy it eventually"

3) Thus there is no "goof" nor "fuzziness" in the logic I have presented here. The fuzziness is apparently the inability of your mind to grok the concept on the whole. Let me explain #2 to you in terms of evolution. Nature puts all possibilities out into the wild, and only the strongest (i.e. the outcome most adaptable or compatible with the overall trend) survives. And a verifiable factor of nature (in all forms and sciences) is that entropy (aka disorder or randomness) is always increasing on the overriding (longest durational scale) trend. In the short-term, nature must allow exponential trends that are counter-trend to the ultimate outcomes. This failure is part of the free market.

Shelby wrote:4) Ray wrote:
"'..Disorder is a mathematical term that means the greatest freedom for the greatest number of independent possibilities....'

If that is 'disorder'. Then what is 'order' - lack of freedom?"

5) 'order' is exactly a reduction in freedom, this is why NWO will be one of greatly reduced freedom. 'order' or opposite of 'freedom' means a reduction in the number of possibilities available. This scientific truth is in the Bible in Revelation.

6) Let's go deeper into #5, and I have often stated that 'insurance' is guaranteed failure. You see people want sureness against random outcomes. But random outcomes are precise the maximization of freedom (disorder). You see fundamentally humans are uncomfortable with adapting to change and to embracing all of the possible outcomes of the universe. Instead they want to force the universe to not change, but of course they can not force this and they can not stop the universe's march towards maximum possibilities (maximum disorder, i.e. maximum freedom). This scientific truth is in the Bible where it says "never be surety for another person".

7) 'chaos' is synonymous with 'disorder', in fact one definition of it coincides with my theory of everything, which is that infinity (or the edge of the universe) is maximum disorder. The problem is that people misassociate 'chaos' with negative outcomes, because people love order (no change) versus disorder (random change). Because people love to put themselves in jails of order, instead of embrace the glory of the continual unknown. And this is why TPTB are aligned with the trend. Because it is a scientific fact that humans will chose order over disorder, and thus the guaranteed failure of the world in a NWO. But the Bible does say that a few people will understand, they will refuse the order and choose to be free instead. It all fits with the science and the theory of everything. In fact, infinite as maximum disorder is the only theory that can explain the singularity of the black hole as I pointed out:

Shelby wrote: Ray wrote:
"Shelby wrote:
...'Ray, you write about the numerous variables that can affect pricing. This is the free market at work......'

Who said it wasn't. Read the context to which I made that comment"

9) Ray if you understand that freedom means maximizing disorder (i.e. the absence of centralized control or limitation of possibilities), then you will understand that freedom is a trend which over a long enough duration is independent of the variables of the free market. You were arguing in this blog that China's central planning is superior and that they are holding back on their potential (the slow Ferrari analogy). I am arguing that by interfering with the free market, they are sowing their own demise.

Shelby wrote:9) Ray wrote:
"The New World Order gives the 'organisers' greater freedom, by subjecting (curtailing) ours."

"Like many words, order can mean different things to different people"

10) Mathematically wrong! The equation for entropy is independent of the observer (the observer is one of the elements of matter considered by the equation). That error demonstrates how ignorant you are of law of entropy (as are some of TPTB, the inner core realize their fate is doomed if they continue, but they choose to continue for the interim gains, to protect their birthright, because it is their culture trained since birth, and because if they did not, someone else would).

The controller loses just as much freedom as the controlled. This is a very important wisdom repeated throughout the Bible. And now I am going to explain it to in scientific terms. Pay attention.

First example of a facet of what I will next explain more generally below. What happens to the Ebola virus when it gains complete victory over it's host? The Ebola virus dies too, because it hasn't had enough time to spread to a new host. And even if it did give itself sufficient time to spread to a new host, if it was successful in spreading to all hosts, then it would kill itself.

Fact is that when you control any matter, it also impacts (and thus controls) you. This is a fundamental finding of the equation of entropy. Do you need for me to discuss the equations?

For example, aggregating great wealth, reduces your freedom. You are no longer able to spend your days following any whim, because you have to manage and protect your wealth. If you stop paying attention to your wealth, it "grows wings and flys away" in time (quotation from the Bible). All the people with wealth who have their money "safely" stored in bonds, precious metal "accounts", with Bernie Madoff, etc.. are all losing their wealth in time.

The Bible also agrees with this scientific fact, and explains (in Revelation) that TPTB will be holed up on a hill near Israel with all their gold at the end, and they will be destroyed by the nations who will rebel against their NWO and their gold supremacy.

11) Ray wrote:
"Who is the 'terrorist' the one who establishes his order by taking it from others. Or the one who fights to maintain his order by resisting?"

12) #11 is a very interesting and intellectual statement, but it is mathematically wrong. Relativity does not apply to order, because order is dimensionless. In it's purest consideration, disorder only counts the # of possibilities. If a centralizing force takes away more possibilities for multitudes then he/she adds to his own perspective, the total disorder is declining and the total order in increasing. And the universe will not let that trend continue for too long. In fact, such a counter-trend must grow exponentially, for as soon as it stops growing exponentially, it implodes. In short, it is an exponential mis-allocation trend.

This is what Revelation explains. And now I have tied it into human nature and explained the science and math.

Now in the short-term (and given the globe is such a big mass, this could mean decades, maybe even centuries more, but I doubt centuries because exponentially changing is accelerating), TPTB and the NWO trend can continue before it finally implodes. And when it does implode, it is going to be essentially a total wipeout of humanity. This is why TPTB that can not succeed, they will destroy their Host. It is mathematically certain. The only randomness is who and what will escape their control in the interim time before final peak of NWO and implosion (and I am not referring to the peak of the dollar system, as that is not NWO yet).

13) The reason I have scolded you, is because you posted in these blogs with a condescending and elitist attitude. If you are going to talk down to people, then at least make sure you are correct first.

14) Ray wrote:
"I think we have 'entertained' others without payment long enough."

We have paid way too much with our valuable time, in order to inform others.

Shelby wrote:Anonymous wrote:
"When is this mythic crash coming then?"

Just when you go long and decide it is not coming, that is about when it will come.

The point is stop trying to make short-term bets. Understand entropy and make long-term bets based on what MUST HAPPEN eventually.

What must happen is that gold must go to the moon. What happens to other assets and speculations may make you jealous at times and other times make you feel very smug. But in the end, I can say for sure that any one who buys gold for the long-term, is going to be the winner.

Shelby wrote:However there is a very big caveat about gold. Given there is only 1 ounce of gold per person in the world, and given most of this gold is already held by TPTB, then it is basically going to be most of society + TPTB against those private people who own gold. This is why the Bible says we will throw our gold into the streets. It will become too dangerous to use it for anything. I am not sure if that comes in this cycle or if that is something for a worse time some decades from now. I do not have enough data yet to know that timing.

What I plan to do, is to spend my gold and re-distribute it back out into society. This is a great increase in disorder (many more people deciding what to do with that gold, than just me).

I am not saving up gold for my offspring or for afterlife. I am saving it up, in order to go to war against TPTB, by spending my gold back into society, precisely when they drive society into a massive poverty with a very high gold price. I hope to do my part, to turn society away from "lets help steal the gold for the govt and taxes" and towards "lets invest and work hard and create more possibilities".

Shelby wrote:Ray,

I finally figured out your psychology. The reason you were constantly talking down (whining) about the masses, is you feel the control of TPTB is inevitable and I think deep inside you do not feel good about this. This discomfort is coming out subconsciously as condescending tone. You've placed your false hope with the Chinese being able to do some great things and the order to come from that being good.

As Jesus said, "I came not to bring peace, but with a sword", I have an inspirational message for you!

I come here with a sword! I am giving you the equation you need to understand that we are not doomed. It is a matter of individual choice. If you choose to join the aims of TPTB, you will have taken the 666 mark and you will be doomed. But there is another choice. Choose freedom. Keep fighting for more diversity, for more possibilities.

I am not fighting with words, but with actions. I have already identitied a major weakness in Facebook that the can not fix (for valuation reasons):

And I am planning to take on the top social networking sites within about a month. I already have a clever domain name, and it will apparent to you in a few months.

I was the creator of, a product for making webpages, that had million users (on free hosting at GeoCities Yahoo) back in 2000/2001, before friendster (the first social network) was even created!

I will be doing action. I have a plan to defeat TPTB's plans with ACTA, which throw a major monkey wrench in their plans to control the internet. My plan is to basically turn the entire internet into Peer-to-Peer, then TPTB and nations will lose all control over it. Massive disorder coming.

The fight has just begun, and you are already throwing in the surrender towel.

Come on! Learn to fight for freedom!

Shelby wrote:Ray, which action is creating greater order (and less disorder), foot lightly on the Ferrari or TPTB manipulating the global interest rates by selling 100 times more paper gold & silver than physical?

This is why it is much more possible for the slow Ferrari to happen indefinitely, and much less possible for NWO to be sustainable. Then again, the implosion of the NWO may not happen in our lifetime.

But what are you living for? For the comfort of your time here? So you will align yourself with the trend towards more order, but then at what psychological cost?

Do not be jealous that my mind is free. Stop using your psychological BS control categories on me. I have chosen less order and more freedom. This time here on earth is nothing but a blip of time.

Being part Cherokee native American, I relish the opportunity to die fighting, versus live my life in a jail of order and control. And this includes the freedom of my mind.

Shelby wrote:Ray, I remember you wrote earlier that you are a psychiatrist. It is a corrupt profession, designed to work with TPTB to control people. You may have been so indoctrinated, that you may not even realize it or even be in control of your own mind any more:

TPTB believe that abuse is normal:

Shelby wrote:When the globalists such as Rockefeller said
Rockefeller wrote:"The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries"

What they mean is that they want to decrease the diversity of social order, i.e. increase social order and decrease diversity.

They claim certain benefits, such as the ability for large corporations to operate a higher economies-of-scale.

But what happens in nature when diversity is decreased? For example, what happens when you make your siblings or cousins pregnant? Birth defects and failure.

In fact, the elite are very inbred. And their ethics is hopelessly twisted. For example, David Rockefeller apparently sees himself as a "kind" person, and while he is giving a little bit, he sucking the life blood out of you:

Rockefeller wrote:"I do not owe any personal income tax. But nevertheless, I send a small check, now and then, to the Internal Revenue Service out of the kindness of my heart."

Rockefeller wrote:"I do not like to be unkind."

Rockefeller wrote:"My grandfather, along with Carnegie, was a pioneer in philanthropy, which my father then practiced on a very large scale."

Rockefeller wrote:"Only once in my life was I on the edge of incivility."

Rockefeller wrote:"Populists and isolationists ignore the tangible benefits that have resulted from our active international role during the past half-century. Not only was the very real threat posed by Soviet Communism overcome..."

1974. In his book, Wall Street and the Bolshevik Revolution, Anthony Sutton "documented the fact that Rockefeller and Morgan banks provided the Bolsheviks with loans, while American industry provided them with the plants and the technology thy needed.


The globalists see themselves as doing a better job of managing the world, but in fact they create problems, that they then claim to fix.

Why is it today that people are not free to move from country to country? It is because of crap the Rockefellers and their ilk have done. Back in the 1800s, people were free to go to any country they wanted to. There was no concept of citizenship or border patrol.

Mostly what you find coming from the mouth of all these elitists is pure BS!,0,3213754,full.story

In China, real estate fever is rising

The country is treading dangerously close to a full-blown property bubble, economists say, and the industrial outpost of Hefei represents China’s embrace of housing to fuel economic growth...

...China's real estate rush, once confined to a handful of leading cities, has spilled into the hinterlands with a ferocity reminiscent of American expansion into exurbs...

..."Prices in second- and third-tier cities are increasing more dramatically than in the first tier. It's very dangerous, and it puts local banks at risk."...

...The average annual income here is $2,000. The local economy centers on home-appliance manufacturing. There are few tourists...

...Huang Qingyuan, a sales agent for one of Hefei's most expensive housing estates — they go for about $120,000 per apartment.

While pricey by local standards, that's still a fraction of what homes cost in the capital. That's why buyers continue to pour in from across the region, accumulating apartments as a hedge against inflation in a nation where there are few investment alternatives. More residential units were sold here the first three months of 2010 than in Beijing or Shanghai — cities four times the size of Hefei...

Shelby wrote:I think this cycle can not move entirely to one world govt, because there are still too many people living in farms. These people are not accustomed to following rules and they have not been raised on Television. However, this is rapidly changing. The priority has been to put electricity and TV on every mountain top in developing countries.

So I do think there is a chance that technology could swing us away from the NWO trend for a while, before more of humanity adopts the western culture (praying to insurance and govt and perfection and accumulating material things and not being friendly to your neighbor "privacy and your own space being important").

I think it is very important what kind of media these developing youth will consume. That is why my focus is here in Asia.

The upside that Ray sees in China in terms of the qualities of the people (the way americans used to be in 1800s), is what I want to nurture, but I disagree this is some power of the govts (e.g. China), but rather it is the power of the people who are still relatively free of imposing order on themselves, as compared to the westerners who are already dead (in Biblical terms, they already whorEshipped insurance, govt, protections, social safety nets, etc).

In Philippines, I pay only $2 to see a doctor, because there is no medical insurance here to drive up the prices. I explained in prior post above, why insurance is guaranteed failure. Jason Hommel at and does a lot of writing about the evil of futures contracts (aka 'insurance').

Shelby wrote:TPTB have already failed on numerous initiatives recently:

* Global warming is a scam as proven by climate-gate hackers

* H1N1 scam failed, Poland even refused the vaccine

* NAU target date keeps getting pushed back

* Rise of alternative information on internet

* Most people realize 9/11 was a false-flag scam

* Major resistance to socialized health care in USA.


Shelby wrote:A link to the most insightful article I have read in a long time is contained within the comments at the following link:

Ray, please read the above link and the article that is linked within it.

China's govt is not acting against the western trend, but rather is working with the banksters.

China doesn't even have 1/20oz of gold in reserves for each citizen. This no where near the nearly 10 oz per citizen the the USA once had.

The fact is that the banksters are mopping all the gold. The people and govts have very little per capita. There should be 1 oz per person on earth. Where is it?

First I want you to understand more deeply why I say the profit (or value) is not in manufacturing but in the intricate level of design that the Chinese can not do. I have seen the Chinese cell phones (e.g. "Cherry" here in Philippines) and there is no way they are close to mastering this critical point that makes the iPod the most profitable cell phone ever (can you tolerate a cell phone that pauses for 3 seconds between some button presses?!):

China as a nation are no where near the level of the upper 0.01% of designers in the world. The global best and brightest go to a few select companies in the world (e.g. Apple, Google, etc), irregardless of national borders.

And you are missing the point about gold. As gold is no longer being used as a currency, when the people have less and less per capita, this enables the elite to hide their monetary inflation theft (aka "mis-allocation" of the economy).

China is symbiotic with this theft. Thus China is helping to drive the world towards this theft system called "NWO". Of course, the poorest in China can see some individual gains, but I am talking about the aggregate result of increasing socialism/centralization which is enabled/symbiotic with a reduction in gold per capita held by the masses globally. As the gold is brought into centralized holdings (even held by the govt), the entropy is declining and we are moving ever close to the 7 year tribulations which is the horrible rise and then finally failure of the NWO (the elite will kill the host and die with it).

Shelby wrote:In short, China is just a pawn of the banksters, and the elite in China are selling their own people into slavery for their own personal gains as elite always do.

Your notion that the Chinese elite are somehow positioning to the advantage of their people is entirely wrong. Elite are elite every where. Human nature is human nature every where (cultural differences do not alter this).

Shelby wrote:Ray indeed I agree that China will play a very big role in the NWO of great socialism "ONE WORLD, ONE DREAM". That is my point, they are a key force that is driving the globe that direction. I explained how they are doing it, by enslaving their own people, and then exporting this slavery in the form of very low prices, by trapping their citizens' savings inside the country. This has driven global interest rates low, because instead of their own citizens being to be a billion beacons of light investing diversely outside their country, what we have is the Chinese institution investing the money in US treasury bonds (driving interest rates lower).

The whole world is being told that the opportunity cost is much lower, because the capital is being focused on those bonds, versus the private sector seeking the maximum returns.

So I agree it will not be a total wipeout for China (their influence will grow, as rightly so as their population is 1/6 of the is just simple mathematics).

But China is exporting their past mistakes. They are exporting their decades of socialism which impoverished their people.

It is up to the west to reject that export, but the west can not, because the people no longer use gold as currency.

So the failure will be shared worldwide. And this is very dangerous to private gold owners, as the world will look to tax your gains (not in ounces of gain, but in an arbitrary theft of fiat value of your gold).

Shelby wrote:That is BS about China not being aggressive. They are passive aggressive (similar to quotes I gave above from David Rockefeller). China is stealing stealing from world, as they claim to be virtuous or in harmony. They are shrinking the pie, while taking a bigger slice of the pie. It is not a fruitful direction for the world. And quality will decline as a whole, even while China's quality will come up. What I mean is they their centralized control will kill new innovation, while they get better at copying past innovation. Their censorship of the internet is proof enough. They will not stop until the rest of the world has enacted the ACTA treaty and is censored as well.

As previously stated, I am hoping for (and working towards) a technological solution that makes enforcing ACTA not feasible.

Shelby wrote:Ray, your latest posts are very lucid and I agree with them.

Let's not forget the Gambler's Fallacy:

What you need to know about gold is that the standard deviation of mean of private holdings per individual (i.e. the aspect ratio of the Bell Curve) is accelerating exponentially upwards, as the mean is accelerating exponentially downwards.

Thus although gold will rise immensely in value, it will become increasingly dangerous for the private investor to hold. I explained that the elite have synergized (even help cause and direct) the failure of the nations and the gold-less masses will be suck the tit of "increase tax collection" to fund their "survival" (further failure!). I expect gold to be taxed at its ever inflating fiat value, thus private gold investors can expect to lose 90+% of their ounces to society.

This is predicted in the Bible where it says we will throw our gold into the streets.

P.S. I am trying to do something about this.

P.S.S. Ray TPTB have power to destroy a nation arbitrarily, but they dare not use it, as if it is not in harmony with the mass trends, they will lose power due to the "Butterfly Effect"s. Wikipedia it. Their power is actually a jail. They are simply feeding (fullfilling the demand) the evil that society has. I enumerated those evils in prior post, i.e. the demand for more order and govt and insurance and debt. Buddhism explains this as the evil of "craving".

Shelby wrote:
Ray replied wrote:"
Shelby wrote:'What matters is what people are doing economically. That determines the politics...'


Of course. Very simple. If the people were all buying *PHYSICAL* gold and silver right now, then it would be impossible to sell any CDS derivatives. If the banksters (elite or TPTB) can not sell fractional reserve paper gold certificates, they are powerless.

Thus the Chinese communist party would also be powerless.

Instead only 1 out of every 10,000 (?) people in the world are buying more than there 1oz per capita (total above ground supply per capital). Thus politics and derivatives are running amok and are in the back pocket of the banksters.

I don't know if it is 1 in every 1,000 or 10,000 or 100,000, but the point is that without at least 1 in 10, we private gold investors stand no political chance against the banksters.

I wanted to correct my prior post within about 1 min of posting it, but we had a brownout here that lasted entire night here. Here is the correction:

Shelby wrote:So indeed the masses are setting the economic outcome. This enables the politics to be what it is.

If the masses were instead refusing to use fractional reserve "money" (actually fiat is always born as a debt), then of course the politics would be different. The masses fail to understand that voting is done by individual economic choices, not in the voting booth. The voting booth is a mirage.

TPTB only exist because the masses demand that they exist, by their individual economic actions.

So enumerate the holes Ray? There are none. That is why you can not.

Shelby wrote:Again Ray lacks insight into what is different now as compared to 1980s.

The juniors have an extreme beta, and the majors provide no more leverage than physical silver.

The problem with investing in stocks (as compared to 1980s), is that western civilization is bankrupt, and so it is very very likely that there will be a complete disrupt of the paper markets.

This epoch is not about "making money with speculations" but about preserving capital, and "making money by capturing the growth of developing markets" with real income businesses.

Shelby wrote:I try to always keep learning, and I am not afraid to present new data that might disagree with something I have written.

I see that Buffet has invested in BYD, and their CEO says that they think they may be able to compete with the world in electric cars: (list near end)

Also he said their profits doubled during the economic crisis.

My perspective on this data, is that indeed (as I wrote in prior post above) that China will learn how to compete on quality, but this was not the larger aggregate focus up to now (and for the forseeable term), and I assert this is true in BYD's case. Their growth up to now, has basically been an exact copy of a Toyota Corolla.

Domestic car sales exploding are not surprising given China's massive (12.8% of GDP) stimulost spending much of it on infrastructure (i.e. roads). Thus BYD is a leveraged derivative of that stimulost. However, when the negative effects of the stimulost play out, the roads will still be there, supportive of huge car sales. However, one thing southern California learned was that after about 2 - 3 lanes, adding more lanes doesn't really support much growth. 2 lanes are 100% more than 1 lane, but 4 lanes are only 33% more than 3 lanes. 5 lanes only 25% more then 4 lanes, and so you don't see any 6 lane highways which would only be +20%.

If you make an argument for suburbia, the USA has already shown that this is a very inefficient use of resources. And it leaves a huge maintenance liability.

Shelby wrote:And another interesting datum, was they use 300 workers to produce 400 cars per day. Given they probably pay < $50 per day per worker, this gives a firm example of my assertion that automation is driving the (labor component of) manufacturing costs to near 0. IN other words, labor is only capturing about $50 / $10,000 = 0.5% of the GDP of making cars (well that is not factoring in the labor of the parts suppliers, but I my point still holds even if labor is 1 - 2%).

Manufacturing jobs will not support full employment for 7 billion people (as all manufacturing is increasingly automated as much as car manufacture). Eventually not even for 0.5% - 2% of the 7 billion.

Shelby wrote:Ray remember I told you that China's profit margins are near 0:

"China’s trade surplus shrank 87 percent...

...import and export department of apparel maker Shanghai Dragon Corp., said in an interview at China’s biggest trade fair in Guangzhou on May 3. “If the yuan rises 3 percent, where’s our profit? Many, many factories will close.”"

Shelby wrote:Shelby wrote:
"...Ray remember I told you that China's profit margins are near 0:....."

Ray replied:
"Amazing! Just where is their growing reserves comeing from?"

Are you sure you studied economics at the finest institution in London? Seems you don't know the difference between profit and a trade surplus. A trade surplus can result from exporting more than a country imports. It has nothing to do with the amount of profit being made on those exports. It entirely possible to be losing money (no profits) and export more than one imports.

It is claimed that China's surplus has been 11% of GDP (although it declined drastically recently due to huge stimulost which drove Chinese imports way up). But this doesn't mean China's exports generate 11% profit margins. It just means China is exporting 11% more than they are importing.

To say that China is adding 11% value, might be more accurate, but again that wouldn't be profits. They may be mining and producing raw materials that go into exports that contribute to the 11% value added, but that doesn't mean those operations are generating 11% profit margins.

Shelby wrote:Ray,

Wealth and material production are not the same, and in fact can be quite opposite and fool the eye. For example, Egypt built great pyramids using slaves, it didn't mean that Egypt was building great wealth. It was actually squandering it's wealth.

It is a fact that China is enslaving its people by pegging the Yuan exchange rate, lower than the free market would. So don't be surprised to discover that China squandering the wealth that should have gone to the workers, and overproduced (squandered wealth) in sectors that are redundant.

You see Ray, you just can't seem to understand entropy. NEVER is a centralized decision maker as efficient in allocating wealth and capital, as is a free market of multitudes of people making their own decisions with their wealth.

China's central bank stole the wealth from the workers by pegging the Yuan.

Theft never works out in the end Ray. You will learn that the hard way apparently.

Shelby wrote:Yes Ray, the central banks of the world are robbing the people in every country. So what is your point?

The average Chinese worker would much rather have his fair value on the free market exchange rate (and thus more personal income), than to have it expropriated and spend on high mountain trains to (and govt expenditures to suppress human rights in) far flung Tibet. That is but one example of waste of wealth by the centralized decision makers in China.

That famous Chinese reliability:

The Solution

The national government has been proactive in implementing a number of programs including higher down payments and higher mortgage rates on second home purchases, 100% down for homes after the second home, the initiation of property taxes, disallowance of government sponsored enterprises from developing real estate, and other restrictions to cut the speculation in its four or five biggest cities. The government has required developers to build more affordable housing (of which there is a shortage) and to stop building high end housing. The effects have been as expected. In recent weeks anecdotal evidence says prices have fallen 20% in these cities. We expect prices to fall further and to return to a normal range within a year or two.

The combination of less real estate purchased and lower exports will cause China’s GDP to slow to no less than 5% in the second half of 2010. We expect GDP growth to pick up again in 2011.

Socialism does not result in prosperity. This centrally managed simulost (bumping imports up by giving away appliances and cars) is socialism and it will lead to very high inflation and eventually a deflationary depression when the Yuan is finally revalued. When China goes into deflation, the west will go into hyper-inflation.

Shelby wrote:Ray I told you China enslaved its own people with the Yuan peg:

Apple's Steve Jobs said "but they have nice working conditions, restaurant, cinema, etc".

I tell you all that is shiny and modern, is not the reality for people. They have bills to pay. $137 per month is slavery.

Last edited by Shelby on Wed Jun 02, 2010 5:37 pm; edited 38 times in total


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Inflation or Deflation? - Page 15 Empty Former Dallas Fed Governor said USA national debt is $100 trillion!

Post  Shelby on Thu Apr 22, 2010 4:15 pm

Folks that is $300,000 per person in USA, including babies and old people! That is getting close to $1 million per household.

Richard Fisher The president of the Dallas Federal reserve stated in May 2008 that the National debt was close to $100 trillion; an excerpt of the full speech is pasted below...

...Add together the unfunded liabilities from Medicare and Social Security, and it comes to $99.2 trillion over the infinite horizon. Traditional Medicare composes about 69 percent, the new drug benefit roughly 17 percent and Social Security the remaining 14 percent.

I want to remind you that I am only talking about the unfunded portions of Social Security and Medicare. It is what the current payment scheme of Social Security payroll taxes, Medicare payroll taxes, membership fees for Medicare B, copays, deductibles and all other revenue currently channeled to our entitlement system will not cover under current rules. These existing revenue streams must remain in place in perpetuity to handle the “funded” entitlement liabilities. Reduce or eliminate this income and the unfunded liability grows. Increase benefits and the liability grows as well


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Inflation or Deflation? - Page 15 Empty "no bailout" for derivatives?

Post  Shelby on Mon Apr 26, 2010 10:40 am

This would mean the banks would lose their hedges and thus any mark-to-market for their reserve assets (loans) would mean they need massive bailouts. So this will not solve anything. The only thing it will do is give more regulatory power to the govt (aka "Capital Controls"!).

This is wolf in sheep's clothing.

This will help accelerate the gyrations of the banker business model:


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Inflation or Deflation? - Page 15 Empty MUST READ!

Post  Shelby on Mon Apr 26, 2010 10:48 am

Make sure you click and read this (you will glad you did!):

And thus we know that suppression of real wages in China (by trapping all savings in the country via Yuan fixed exchange rate), is part of the method of hiding inflation by hiding that people are underemployed (in terms of real wages). Go back to my long China post above and you will realize I am correct, that China is a massive symbiotic mis-allocation bubble designed to suppress wages globally and to hide the massive monetary inflation that the banksters are doing right now.

Gold is starting to sense this.

I sense that the plan of the banksters is to revert to capital controls and then use political support via the bankruptcy (hunger) of the masses to go after the gold investors and steal it all via taxation and fascism. Don't forget to review the bankster model:

In the linked article above, you see Nielson's first link is to fofoa blog, and you may remember angophera and me debating and discussing the fofoa thesis last year:
(you really should go read this again! What I wrote will be much more convincing now!)


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Inflation or Deflation? - Page 15 Empty Western economies are toast (chart) (33+% monetary inflation!)

Post  Shelby on Sun May 02, 2010 5:30 pm

As horrific as these BIS charts below are, I suspect the charts below are cash accounting projections, and probably do not include the more dire implications of correct accrual accounting:

John Willliams of wrote:If you look at those GAAP-based statements and include in the deficit the year-to-year change in the net present value of the unfunded liabilities for Social Security and Medicare, what you'll find is that the annual operating shortfall is running between $4 and $5 trillion; not $500 billion as we saw before the crisis or the $1.4 trillion that they announced for fiscal 2009. Now to put that into perspective, if the government wanted to balance its deficit on a GAAP basis for a year, and it seized all personal income and corporate profits, taxing everything 100%, it would still be in deficit. It can't raise taxes enough to contain this. On the other side, if it cut all government spending except for Social Security and Medicare, it still would be in deficit.

$5 trillion a year in accrual deficits in a $14 trillion economy, is proof enough that monetary inflation is running north of 33%! Are your wages/income, investments and value of your major assets increasing 33+% per year? Because those deficits have to be funded, either via monetary inflation or taxes, and the latter will just create a spiral of more deficits. Thus all these deficits are in effect future monetary inflation. The moment of truth (or the shit hits the fan moment) will occur at some point.

Inflation or Deflation? - Page 15 Image011 <--click for article
Inflation or Deflation? - Page 15 Image010


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Inflation or Deflation? - Page 15 Empty Steel prices rising daily in Asia!

Post  Shelby on Tue May 04, 2010 6:30 am

Just got back from hardware store and they tell me that prices for steel bar are rising every day!

We are nearing hyperinflation again like what happened in 2008 with food and gas prices, but this time with steel.

There will need to be a liquidity crash soon, or this could go into hyperinflationary mentality. I certainly felt the rush of people at the hardware store. Contractor (with 400 employees) told me here that they are killing themselves to work as fast as they can. I saw the guys loading steel on truck and the usual filipino slowness was not evident, they were racing to load it.


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Inflation or Deflation? - Page 15 Empty Inflation is the quotient of non-productive to productive

Post  Shelby on Wed May 05, 2010 2:15 pm

Shelby wrote:Here follows a shocking, epiphanic equation for "Inflation versus Deflation" from the author (myself) of "How Deflation is Inflation":

Assets become way over priced when people are allowed to borrow 30 years of income, or recently an infinite # of years of income (subprime, liar loans). The lack of land titles and debt-financing is often why real estate is still so cheap in rural developing world. I expect this will change in a NWO.

The deflation in the price of saturated credit based assets (e.g. real estate) is not the primary phenomena, and this is the key mistake of the deflationalists (e.g. Mish's credit money supply equation).

The near-term measure of the money supply, credit, and velocity of money are meaningless noise. What really matters is the ratio of the productive to non-productive sectors (population). The lower the ratio, then the higher the inflation in future. This may be the first time any one has pointed this out, I dunno. Why is this so? Because less production means higher prices.

That is why I have recently written that we should be looking at the accrual deficits in USA, which are running $5 trillion or 33+% of the GDP:

This means future inflation is being accrued at 33+% per annum acceleration, as the non-productive expands relative to the productive (the public sector is displacing the private sector).

And I have written about my well-founded theory, that this shift is due to the massive unemployment resulting from extreme automation at the twilight of the Industrial Revolution:


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Inflation or Deflation? - Page 15 Empty re: Inflation is the quotient of non-productive to productive

Post  Shelby on Sat May 08, 2010 12:13 pm

Shelby wrote:...The near-term measure of the money supply, credit, and velocity of money are meaningless noise. What really matters is the ratio of the productive to non-productive sectors (population). The lower the ratio, then the higher the inflation in future. This may be the first time any one has pointed this out, I dunno. Why is this so? Because less production means higher prices...

There is a fallacy that if people produce less, then they have less money to spend, thus deflation instead of inflation. There is a total of goods and services in any economy, and a reduction of this total means everyone has less if shared equally. This means those who are producing the same, will demand the same share as they had before others produced less. Thus the price for those who produce less, will rise. Price has to match where the supply&demand curve intersect. Whether this occurs via monetary inflation or not is irrelevant to whether prices will rise due to a drop in production. Monetary inflation is only relevant as to whether the price rise will be paid by those who are productive, instead of by those who are not. In other words, monetary inflation is a method of theft. And monetary inflation disincentivizes production, and thus can cause inflation to accelerate. Realize again, that inflation and monetary inflation are not the same. Inflation is the (increase in the) quotient of non-productive to productive. Monetary inflation is a way of stealing net worth from savers (producers) and re-distributing it to others (those who get their hands on the new money first, which is govt and bankers).


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Inflation or Deflation? - Page 15 Empty Mish Shedlock responded

Post  Shelby on Sat May 08, 2010 10:24 pm

> I do not have time to debate nonsense like this "Inflation is the
> (increase
> in the) quotient
> of non-productive to productive"
> You are free to believe what you want
> Mish

Hi Mish,

Thanks for the reply.

There is a simple proof that you have been wrong already about price deflation, as measured in fiat. The gold price has risen roughly 75 - 100% since the first time you predicted deflation, and roughly that much in all fiat currencies.

The only things that have declined in price in that time, have been assets that were pumped up on credit, i.e. western real estate. You might be able to argue that we have deflation as priced in units of gold, except for some assets such as condos in China (and from my first knowledge in Hong Kong and in Davao, Philippines and probably all of Asia).

One would be blind to not notice that prices of rent, education, electricity, fuel, food, telephone, internet, and most basic necessities, all continue to rise in price. Where I am in Philippines, the prices (except for fuel) are back above the rapid rise in 2008 prices before the liquidity crash. Gold is also reflecting this reality. Silver is not back above the 2008 level, probably only due to the ignorance (gullability) of investors and the high beta of a tiny physical market that could be sold out overnight otherwise.

Rising gold prices means that inflation-adjusted fiat interest rates are negative. That is an economic fact, as what presented in famous paper by Larry Summers. Negative real interest rates means the value of fiat (even if holding a bond paying interest) is losing purchasing power. That is price inflation. A simple calculation shows that when gold was money we had massive deflation, as savers did 33,900% better in 1800s than in 1900s:

So I really do not need to say more. The market has already spoken that you are wrong.

I think you do a disservice to mankind, because your misinformation keeps investors out of gold and silver, and this is the only way that investors can end the theft going on right now and force the deflation that is necessary to stop the coming hyperinflation. The longer that investors hesitate due to deflationalist nonsense, the worse the hyper-inflation is going to be. You want that legacy?

But I went further and I explained what is driving that inflation, i.e. the fundamental metric we can use to predict when inflation will stop.

It is quite simple to understand. Read again what I wrote below in prior email. When the non-productive sector of the economy is growing relative to the productive sector of the economy, then you will have inflation. It can not be any other way Mish.

The supply of credit can be widely manipulated by the fiat controllers, but the ratio of non-production to production can not be. If capital is not mis-allocated, there will be an increase in necessary production relative to non-production, then there will be deflation. Vice versa generates waste and inflation. Using the rubberband metric of credit, you take you eyes off the ball, and can be fooled by the fiat magicians.

How can you deny that prices are rising all over the globe, except for the bubble of western real estate?

There is another simple proof that we don't have deflation. During deflation, people can afford more goods and services, because real prices are declining relative to their income. This is the case in some places in Asia now, as their production is increasing relative to their non-productive, even though prices are rising, their real wages are too. We actually had deflation from 1929 to 1933 because our dollar was gold (as would be the case now for people who hold gold), as people were eating more butter, more chicken, etc.. Howard Katz has written about this. As soon as the gold was stolen in 1934, we had inflation and by WW2 people couldn't eat butter and were priced out of most basic necessities.

Right now, the USA is accumulating accrual deficits that are 33+% of GDP annually ( ). Marc Faber and John Williams ( are correct, that hyper-inflation is unavoidable in the future for the USA, when these accrual deficits are marked-to-market by rising interest rates. It will be a snowball from hell, and TPTB will be forced to bind the dollar to gold, or we will head into a Madmax scenario. Then we will get massive deflation.

Mish I intend you no ill feelings or ill will. I studied and thought deeply about your theory about credit money supply, and frankly it is not in touch with reality.

Again thanks for the reply and I wish you all the best.


> * There is a simple proof that you have been wrong already about price
> deflation, as measured in fiat. *
> That comment is proof you do not understand my position or what I said.
> Mish

Hi again Mish,

I certainly want to correct any misunderstanding.

Please point me to a link(s), so I may clarify my understanding of your position, and so I may correct the public record of any of my statements.

I do know you have advocated gold.

I think you have also advocated bonds (in past?)? If not, then what is the point of using the word "deflation"? What investment decision reflects your deflation?


Mish one correction:

> I studied and thought deeply about your theory of credit money supply,
> and frankly it is not in touch with reality.

Except as a short-term indicator, e.g. the liquidity crash in 2008.

Whereas, the quotient of non-productive to productive is a long-term indicator that accumulates (responds/turns) to increased (public or private) credit (mis-allocation) more slowly. For example, any moves to restore this quotient to a downtrend, will likely first temporarily exacerbate its current uptrend. I think you have noted that total (public+private+derivative) credit is still increasing. The private credit is declining, which means most people are losing purchasing power relative to total credit.

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Inflation or Deflation? - Page 15 Empty More Mish

Post  Shelby on Mon May 10, 2010 2:07 am

> before you send me convoluted theories about what inflation is or isn't I
> ask you to read some books
> - What Has Government Done to Our
> Money?
> - Economics In One
> Lesson
> - Economics For Real
> People
> Unless you have a starting point that inflation is an increase in money
> supply you are so far off base it is not worth discussing.

How can we use a starting point that can not be defined?

Even Greenspan has stated, as well as many other prominent economists, that the money supply can not be precisely defined nor measured. Apparently this is why gold is so important, to give a market feedback loop on what is really happening with inflation. Apparently Larry Summers realized this, and that is why they suppress gold and silver. It is the way to hide the inflation from expectations.

One problem we run into is that money supply is as much "expectations" as it is hard counts. And that money supply effects depend on the 1st or 2nd derivative (velocity or acceleration) of something imprecisely defined and measured.

Money is also not precisely defined and can not be. For example, gold, short-term credit, long-term credit, time deposits, swaps, zillion forms of unregulated derivatives, private contracts, etc... are all forms of money. Money is a promise. It is based on far too many dynamics things, that can change drastically in a matter of weeks. And public expectations can change rapidly, quickly altering the money supply yielding some prior measurement highly unpredictive.

=========Inserted on June 6, 2010============
I see that on May 29, Bud Conrad wrote a similar analysis about imprecision of the money supply and how "expectations" is most important: (see "M3 Falling")

That is why I have stated that the direction of inflation is more concretely predicted over the long-term, by looking at direction of change in the ratio of non-productive to productive sectors of the economy. These can be measured and change much more slowly (slowly enough to measure the trend with confidence) with respect to changes in the "money supply", credit, etc..

You have attempted to (re-)define the money supply, including some forms of credit. I found it to be interesting and useful for explaining some things, e.g. the liquidity implosion in 2008. You've apparently not included for example "inflation expectations" (which I understand Greenspan and Bernanke both understand to be the most important, which I understand is the stated reason that gold and silver are suppressed). I predict (based on my method), that we will soon get a lesson on how fast that can change and what powerful force it can be. When the stampede in expectations begins, measures of credit will have no bearing on the price inflation rate.

> That is my starting point,
> Given that we have a credit based economy it is critical to bring credit
> into the equation.

Long-term abuse of credit causes the non-productive sector to grow. Austrian economists understand this. They understand it leads to a crack-up boom at terminal stage. And I suspect that my statement about the ratio of non-productive to productive is really just a more concise summary of the Austrian theory.

Short-term gyrations in credit are not predictive of that final crack up boom (rapid devolution of inflation expectations), because they aren't measuring the fundamental effect that is becoming critically unbalanced.

> Many Austrian economists do.
> My beliefs model the real world.
> You have conjured up a theory out of nowhere, and want me to believe it.

Actually I think I got it from Austrian theory. It suspect that is essentially what the Austrians are saying. Also my statement is another way of stating that we should look at the marginal utility of debt, which recently has declined far below 0, which is apparently the terminal stage of a credit based financial system.

So the question is what happens when a credit based financial system fails (when credit adds no and actually decreases production)?

Would you answer deflation? How can it be deflation when all or much of credit based production stops? People still need to eat. Those who have enough capital to still produce in systemic credit failure, will be able to charge extremely high prices. They will have to, in order to ration their limited supply. Or the fascist govt will come in and steal and ration it, which will further decrease the private supply. If the public sector tries to become the productive sector (as it is doing now), it fails miserably in hyper-inflation every single time. Can you think of one example in history that ended in deflation? Are you arguing they had deflation in Argentina (just because real estate declined in foreign currencies' prices), when many people couldn't afford basic needs?

Harry S Dent has apparently shown that inflation increases correlate with booms in the demographics entering the work force. There you have a huge increase in non-productive sector that has to be incorporated into the productive sector. Once they have been incorporated into the productive sector, inflation typically subsides. Typically there is an increase in credit also. But the increase in credit is not the driving force of the inflation, it is the increased demand for goods from a buldge in the working age demographic, that have not yet fully optimized their contribution to the aggregate production.

> Do yourself a favor and read those books.
> Then read Steve Keen.

I suggest you read Howard Katz.

You give me one example in history of world? Katz has shown that productive to non-productive quotient was INCREASING during the 1929 - 1933 period, simply by observing that Americans were eating more butter and other basic goods than before 1929.

That was because the people were holding gold, when the non-productive crap from the 1920s burst. But this time, the people are holding toilet paper. That guarantees that the people will experience inflation, just as they did during the continuing depression after 1934 confiscation of gold. Eventually ending with having no butter or much of anything during WW2.

Let me repeat again, that deflation is a good thing. Deflation means people are able to consume more, because there is an excess of supply. If credit implodes and you get a deflation of production, that is not a deflation of prices (except for people holding the anti-credit money, called gold).

The problem we have now, is that less than 1% of people hold their money in gold, and thus a credit implosion means bankruptcy for 99% of the population. Obviously this won't be tolerated, so it means massive theft. Whether the theft be by printing money and/or by taxes, both already are and will continue to result in massive price inflation. In short, there is no way for there to be any deflation for 99% of the people. They pulled forward their demand by 30 years with credit and that is never free. Now they will have to pay. They will pay either with higher prices and/or limited/rationed supply, which are the same thing. It might come as a forced rationing with price controls, but that can't be sustained and ends up as price inflation.

We are and will continue to see a deflation in prices of credit-saturated asset values, e.g. western real estate. And we are and will continue to see an inflation in the prices of basic necessities.

And those long or short bonds is going to get killed eventually. The longs because real interest rates are negative and interest rates must rise. The shorts because the financial system is going to fail and the counter party will eventually not pay and/or the govt will steal the profits.

There is one and only one place to be now. Gold and silver. Don't be late to get a chair. But on a sad note, I am not confident the govt will let us hold on that chair. The govt will I bet attempt to tax the fiat appreciation of our physical ounces.


> I like US treasuries right now

Indeed we might get numerous credit implosions and flights-to-safety to US treasuries, before we reach the point of systemic collapse in the world financial system, and the final flight to gold at the bottom of Exter's pyramid. US treasuries are above gold on that pyramid, thus are the primary flight-to-safety recipient until the very end, then only gold.

However, we may be much closer to the end, especially since EU crisis, we see gold rising at simultaneously with the dollar. The coming implosion of the 2nd round of real estate defaults may push the system beyond critical and there could be shift in expectations by only 1% of population, causing them to stampede into gold, and hyper-inflation for the remaining 99% of the population. A form of capital controls have been codified into law in a recent housing aid bill he signed by Obama on March 17.

However, I will give possibility that the end is not until few years from now, if 99.9% of expectations can continue to be ambivalent to lukewarm towards gold and silver.

> I like gold on the belief gold is money and gold does well in deflation in
> the senior currency

The senior currency never deflates when it is not gold. Can you find one example is history of a fiat currency untethered to gold that had deflation? We certainly don't have deflation of general prices in dollars now. Visit, or just talk to people about their real cost-of-living.

If I am not mistaken, even rents are rising, even though housing prices are declining. The deflation of housing prices is not deflation in the total REAL cost-of-living, because interest, real estate tax, and insurance rates are rising (offseting price declines) and because REAL wages are declining or not increasing enough while the cost of basic necessities is rising to give an overall reduction in cost-of-living.

When gold is rising it is telling you that real interest rates are too low (because gold pays no interest). This tells you that there is no deflation.

Gold has never gone up at the same time a fiat currency has appreciated in value. That only happens when the currency is fixed and convertible gold.

> Gold also does well in times of credit stress
> Gold does poorly in ordinary inflation
> 1980 - 2000 ought to be proof enough.

Gold does poorly when you have an epic bond bubble created by leasing of gold to bullion banks by the world's central banks and lying about the CPI to prevent the public from realizing that REAL bond interest rates are negative. But eventually the central banks run out of gold to dump on the market, and then gold starts rising.

Also realize that silver was demonetized in 1965 and 1971 worldwide, creating a 20 - 40 billion ounce glut of silver coin that was essentially dumped on the market by the public's acceptance that money would no longer be silver.

So the public essentially agreed to take in the ass on inflation, so yeah metals did not do well due to public "inflation expectations" being preoccupied on all the low-cost trinkets and high standard of living they were being fed by the symbiotic enslavement of the third world by this supression of real, hard asset value.

You know that USA was consuming on the order of 25+% of the worlds resources at peak, but only has 5% of world's population. Ditto west in general. Pay back time is now.

> When it comes to investing, forget about doing anything for the long haul.

I will argue precisely the opposite. Those betting on short-term, are playing a very dangerous game of musical chairs. Only 1% of the world's population is going to be able to buy any gold. When the rapid shift comes, those who don't have any will be locked out in a very short-time. The price will go parabolic. We then enter madmax and hyper-inflation, or there will be some fix of the dollar to gold at astronomical prices (assuming Ft. Knox still has any gold, which is dubious), enabling the govt to justify "heavily taxing the gold speculators" (i.e. those of us who bought gold).

> Investing for inflation or deflation can get one wiped out as 2008 or 2009
> proves.

I was invested for inflation, had a 30% haircut in silver and gold, and then gained it all back plus more in 2009. The only losses not recovered were the speculations in mining stocks. I no longer invest in mining stocks. One reason my losses in silver were not greater, was that I was screaming "sell" at $21 and because I was able to sell physical bullion at 10 - 20% premiums on that take down and then rebuy large bars or ETFs at very low premiums. And I was able to time some of my re-purchases (was selling on way up to $21 and down) at around $9.

And by being mostly in physical metal during all this time, I have the safety against a complete failure of the dollar system.

> One has to roll with the punches.
> The US is likely to go in and out of deflation for numbers of years just
> as
> Japan did.

There has been no deflation in USA in past decades. shows that the true (pre-Clinton) inflation rate never dropped below 1%. You can't get deflation on a fiat currency. Has never happened in history of world. You can only get deflation with a gold currency.

You will find that the Japanese govt lied about the CPI also, in order keep its citizens money in bonds at ridiculously negative real interest rates. As a result, Japan is incredibly bankrupt and heading for social chaos soon.

The difference between Japan and USA, is that Japan had a huge resevior of internal public savings to stretch out the bankruptcy for decades. The USA public net worth is negative, once it is marked-to-market, by higher interest rates and the stampede to gold. 99% of the people will have a negative savings at that point.

The moment of truth of the Austrian crack up boom for the dollar, is coming soon, certainly before end of this decade, if not much much sooner.

I am just curious, what truthful metric do you use to say there is general price deflation? Can't be CPI nor gold, as these have not deflated.



One final point.

I've been canvasing land for sale in Philippines since about 2005. Since 2007 (roughly 2 years), I am seeing land 33 - 50% higher in price. This is for highly under priced land, for example $20,000 for residential lot in a complete subdivision on the beach in a major city of 2 million population. (Note foreigners can not buy land here)

How can a 4% bond be justified?

Only gold and silver is keeping pace. Since I first started buying metals in 2005, they have kept pace with the land appreciation here in Philippines. And there is virtually no credit in these land prices, nearly all purchases are cash.

I just can't find the price deflation you speak of. Can you?



Mish, I just wanted to thank you for taking the time. I am trying to make sure my understanding is correct. I look for someone to be able to explain to me why I am incorrect. And also to help spread and formulate complete understanding. I was happy to see you and Marc Faber smiling and seems you too struck a friendship. People seem to like Faber even if they disagree with him. I wish I could learn how he does that.

I have debated also the deflationalist Denninger (at Market Ticker), and he understands the coming implosion of a dead economy, and believes that those who buy gold deserve to be targetted by the government. He thinks the solution is one of enforcing laws and rebuilding the economy in a legal way. He doesn't seem to understand (law of entropy/nature) that without gold as a dispersed market-based regulator, the centralized law will never be for the benefit of the people who hold no gold. Many examples of socialism in history of world have proven this.

As best I can understand you so far, seems as though you think the dollar is not being debased relative to things that matter. Thus you are not fearful of holding US treasuries and you do not expect a sovereign default for the USA. Whereas, I do see a sovereign default on the horizon (although it could take years yet), either in the form of hyper-inflation and/or a fix of the dollar to a very high gold price (which I suppose will be roughly same effect in terms of radically higher cost-of-living and/or rationing for westerners). This won't really be felt in a radical way, until the developing world decides it is not worth financing the west to export to them and/or until 1% of world's private wealth decides to stampede to gold and silver. This stampede occurred recently in Greece, so we have a model for how it plays out. The world will huddle together to socialize any such default, but eventually those people who don't want to lose their entire net worth to this socialism, will go for gold. The western govts are preparing for this stampede and capital controls ("financial regulation") are apparently being prepared (I provided one example before).

> 1. I am surely not looking at prices in the Phillipines
> How the hell is it even relevant?

Because afaik, Philippines (is what I have first-hand knowledge of right now, and) is a reasonable proxy for land in the developing world, where credit has not been used for real estate up to now, and where the majority of the world's population lives. I have a contact involved in real estate in Colombia and also I have observed land prices on the internet in Argentina, and seems to be similar pattern of land not being pumped by credit and now seeing a steady appreciation, ignoring any volatility in the western credit markets. has said all land purchases are cash in Argentina and nearly ditto in Philippines. Marc Faber said recently and I observed on my Dec 2009 trip there, that real estate prices in Hong Kong are going crazy, so that is a credit market example for you. How else would one explain credit based assets outside the west are booming while not inside the west, if not for inflation in places that are productive and deflation of credit markets in non-productive sectors (being offset by public credit increases for a total increase in credit)?

It seems to me that you are measuring your net worth relative to the quantity of cheaply made pine&plaster houses (for termites) in USA (priced 10+ times above their raw materials value), which I understand to be an irrelevant measure of purchasing power. I recently built a home (with steel trusses and concrete walls and floors) for roughly 1/50 what I would spend in USA for same area.

It seems to me if you measure your net worth relative to houses in the USA, a decade from now, you find that you can purchase much less in the developing world. Ditto energy, raw materials, manufactured goods, services, and basic necessities prices within the western countries.

> 2. of what price deflation other than housing have I even spoken? Are you
> even reading me? My focus is on the credit markets

Okay we are getting some where then in our mutual understanding.

Perhaps you could consider making it more clear on your website, that your financial advice is measuring purchasing power relative to overpriced (by 30 years of income pulled forward) pine&plaster houses in USA, and designed to keep people ahead relative to their value in a dying economy.

I would not want to be pricing my net worth relative to a dying economy. I would want to make sure that my capital is keeping pace with the high growth areas and the future of the world.

What is the point of measuring purchasing power relative to USA credit markets for real estate and retail (that is most of the economy)? That is a dying, unproductive economy. How will that protect someone's net worth for the future and future investing opportunities?

> 3. Do you even understand what deflation is?

I have to ask you the same question. Seems you do not understand that deflation is an increase in purchasing power of the broad population.

You seem to think deflation has something to do with credit. I refuted this by asking you to provide even one example of how this matters in reality, and I have explained how it does not matter in reality. And I have explained what is happening in reality and what matters.

Sure we have a western credit bubble and it will eventually deflate (it is not deflating now, unless you are only looking at the private sector). But this is not deflation. Just look at the reality of what is happening to the cost-of-living for both westerners and people in the developing world. As Howard Katz explains numerous times, this is what the banksters want you to believe, but the reality is when they want us to think we are in deflation, we are actually in inflation, and vice versa. And the facts prove this. I found this article to very interesting, as it explains what is happening now in USA:

What bothers me is that the westerners are not being made aware that they are clinging to a credit system and an economy which is dead. It will implode and their relative value to the developing world, will determine how bad the hyper-inflation will be. The further we push on in measuring purchasing power relative to things that do not matter, will enable the non-productive sector of the westerners to grow and will make the coming hyper-inflation worse.

What americans should be doing now, is buying gold and silver with both fists and making the severe transistion to an economy that produces value. It is not going to be easy, but the longer we stay in la la land and keep pumping up the public debt to sustain a dead economy, the worse it is going to be in the end.

You are apparently an influential person, and I am grateful to you for taking the time to at least read what I wrote. I stand ready to read anything now or in the future that can help me understand more. All I want is that we can live in a happy future. I am see your photo work and I believe you have the same virtues, we just have a different perspective of what is transpiring now. Let's see if we can come to understand each other more in time. I am not trying to make you look bad. Perhaps there is something I am supposed to learn from you. I am pleading with you, because you are so influential and have apparently earned a position of respect.

All the very best,



After reflecting a bit on our discussions so far, I realized that you would be tempted to dismiss my points because you might think that I don't understand that many economists say that inflation and deflation are defined by changes in the money supply, not in prices. Or that the changes in prices is a lagging indicator.

Inflation and deflation without an ultimate impact on prices is irrelevant to economics. So the only debate is what is the best forward metric for predicting changes to the general price level that affects most people's cost-of-living (i.e. real, not nominal, wages).

You have been arguing that any consideration of the money supply, without including credit, is inaccurate. I will not entirely disagree with that per se, but there are several problems. First, you need to include public credit, and in which case total credit is not deflating now. Second, you need to somehow incorporate how the shift from private to public credit, alters the effects on the broad population. Third, there are numerous other effects that are not modeled by such a model of credit money supply. For example, we can have a deflation of credit for consumption and housing in the west, but simultaneously have an inflation in activity in more populous economies that are operating primarily in cash. Although these markets are smaller per capita, they are nearly the same size in total and are growing at double-digit annual rates.

This is why I have said that the only deflation that ultimately matters is the one where the broad population experiences an increase in purchasing power, and vice versa for inflation. Gold has historically been the forward looking barometer for this. Gold is able to incorporate all of those factors that are not in your credit based money supply equation, because gold is a dispersed measuring tool voted on by the market of millions of people who have capital.

What is particularly worrisome now, is that for the first time in the history of the world, there is no government nor currency backed by gold, and no people on earth are using gold (except maybe India and Vietnam are exceptions, but I don't know enough about them). This has apparently enabled and been enabled by (symbiotic), the suppression of the gold and silver prices, thus preventing the financial markets from correctly pricing and allocating resources. This has gone to such an extreme level, that I fear we are heading towards a cataclysm that is hard to even fathom and speak about. I hope you are aware that unless there is a severe reduction in entitlements, not even 100% tax rate can prevent a debt spiral for the USA. And I will argue that you can not cut entitlements, in fact they are accelerating politically. And increasing tax rates will just accelerating the problem, by killing what is remaining of productive sector. We are headed into a tempest of the worst degree. This is not something you want to be wrong about for your legacy.

I urge again for you to read the following link and consider that which we won't know for sure until it is too late:

Subject: What is your performance relative to gold?

Lastly, I think people fool themselves by measuring their performance in fiat. Analysts should report their performance relative to gold over the past years. I doubt many are outperforming gold, unless they are invested in cash businesses in the booming developing world, or a derivative export or high tech business.

Bonds and stock market are underperforming gold since 2001. This trend will accelerate as the suppression of the gold and silver prices is nearing the end (central banks have no more gold to sell, most old silver coin has been mopped up already, Jeff Christian admitted that LBMA is selling 100 times more metals than it has, etc). I see the CFTC has launched a criminal and civil investigation against JP Morgan. Of course this is a farce, but it means TPTB are nearing the point where they will let gold and silver run in a parabola (hyper-inflation) so they can trap the masses in poverty:

Mish, I hope you are aware that the BIS reported that OTC derivatives along are 100 times more silver promises than exists physical silver mined annually.

$1000 silver is going to be a shock to many bond bag holders.

Subject: BIS report on OTC derivatives for precious metals

Here are the links, in case you doubt the explosion coming in precious metals (Hommel has 80,000 confirmed readership):

Also I recently read that Americans are buying for investment (Silver Eagles) more than the 40 million oz produced by domestic mining. This is a problem, because by law Silver Eagles can only be produced from domestic silver. Perhaps recycled may be allowed.

One more tiny point about the tiny silver market.

Remember that as of 1964, silver was coin money nearly the entire world.

One key point is that industrial silver consumption exceeds annual mining, and thus recycling is critical to suppressing the silver price. If investment in silver increases much more, without a significant enough price increase to induce heirloom silver to market, there isn't going to be enough to meet industrial demand.

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Inflation or Deflation? - Page 15 Empty Mish and I get into the meat of it

Post  Shelby on Tue May 11, 2010 2:39 am


Thanks for taking the time. I am reading carefully...

> how long have you been reading my blog?

A few times over past year (more than a year, maybe it is 2 years). I would estimate I have read maybe 20+ pages of your site.

> I have addressed most of your questions 500 times.

Apparently not. Read below...

> Seriously, at least 500 times
> How many times do I have to state my definition of deflation before you
> can
> find it?

Okay but your definition of deflation does not correlate with the reality of cost-of-living. I am wondering what it is useful for?


I remember reading some portions of that page, since that is your fundamental equation. I just read it again and tried to force myself to read every word, even the parts I find to be going off on irrelevant tangents.

Mish wrote:
"Conditions today are essentially the same as during the great depression"

Mish that is wrong. In 1929, the dollar was convertible to gold at a fixed price. That changed in 1934, which is also when USA switched from deflation to inflation.

In 1929, the USA was a creditor nation, now we are one of the most prolifigate debtor nations in the history of the world.

Those are 2 of the most important fundamental differences when considering inflation and deflation.

Mish wrote:
"Inflation is a net expansion of money and credit"

I believe we continue to have this both within the USA and globally, if public credit and derivatives are included. China I think was doing public stimulost to the tune of 12+% of GDP. I read there is another $586 billion stimulost follow up coming. USA public sector borrowing is growing at insane rates recently.

Mish wrote:
"..perceived belief that Fc can be paid back is under attack, both by rising defaults, and by sentiment. That is why MV(Fc) is collapsing..."

And being supplanted by public sector credit and guarantees. I have not seen a calculation for total (public+private) credit that shows a decline. Thus the jobs lossed you mention below, is inflation. It is a re-distribution of wealth from some to others (those who end up with a smaller portion of the expanding debt pie, are seeing inflation), as I explained my seminal article "How Deflation is Inflation":

I gave an example in my previous email, where even though housing prices have fallen, in some cases total costs will not, because the real estate taxes and insurance premiums will have to compensate for the losses in tax and insurance base. And even in those cases, where there is some real cost savings in housing for some, this is not enough to offset the inflation (drop in real wages) that the broad population is experiencing.

Mish quoted:
"...If banks will not lend and banks sit on that cash forever..."

The reason the Fed broke the law (Denninger) and purchased bad assets, was so that these could be transferred to the tax payer. The reason the Fed incentivized the banks to hold the treasuries they got at the Fed, is the Fed is working within the bankster model (the link I gave you numerous times in prior emails) and they will release the hyper-inflation (lower the real interest rate they pay for holding reserves) when all the debts and bad assets have been transferred from the Fed stock holder member banks (e.g. JP Morgan) to the tax payer.

In the meantime, we are already seeing inflation (as I have documented in prior emails to you), just not yet hyper-inflation.

To be wrong about this, is going to be not only financial suicide but potentially life threatening.

Mish quoted:
"...If lending will not increase we can conclude this will not be inflationary..."

This will only be true if public sector borrowing will not increase, but of course that would be a sovereign default (interest on national debt can't be paid if borrowing doesn't grow, unless you assume politically we can cut entitlements), and hyper-inflation. See all roads lead to the same conclusion. I wish I had Marc Faber's email address, I bet he would nod his head.

Mish wrote:
"The key issue is that the market value of credit is collapsing at an amazing rate.

This is deflation"

Where? Who is experiencing this deflation? Seems you are agreeing that wages are stagnant or falling. And I have documented that prices are not falling, and thus real wages are declining and this is inflation.

It appears to me that you are trying to form a definition of inflation and deflation that (is not correlated with the cost-of-living and instead) would tell us the direction of productivity, i.e. whether the western economies are going become more productive or less productive per capita (and not the liar statistics from the government about productivity that do not accurately report unemployment). If so, I agree with you, that productivity is deflating. And this is causing inflation. That is precisely what I was saying in my first email to you.

In short, most do not want to lend nor invest in the dying western economies, and the public sector is forced to supplant the lost credit and investment. This is a recipe for inflation and later hyper-inflation, when the spiral feeds on itself to the point of total failure and stampede from the sovereign bonds (Greece).

And this is why the stock market is going up and why commodities went crazy, because the money that doesn't want to go to western investments and lending, has to go some where. But as of yet, most capital is still playing it "safe" in western bonds. This is because too many people think like you do. They are going to lose everything. I do not say that to be mean-spirited or egotistical, but I am just concerned. If we could convince more people to buy precious metals sooner, we could stop this bankster theft model earlier, and mitigate their success.

I do not understand why it is so difficult for people to understand this. That is why I am trying to understand the way you view this. Or maybe I will learn that I am wrong. I continue to read...


I had read this in past.

Mish wrote:
"That for me is the key issue. And the reason why it has not affected the prices of goods, services, asset prices, or even inflation expectations as measured by TIPs is that banks are not extending credit"

Those who invest in TIPS are losing their shirt over time, as the government lies about CPI, so I would only use that as a metric of for how much longer bond holders can remain ignorant. Once TIPS moves, then hyper-inflation is upon us, because it will mean the sheeple are stampeding towards to already closed corral gate.

Mish wrote:
"Interestingly, refusal to lend is a worldwide phenomenon"

Not in China or Hong Kong. Afaics anecdotally at least for personal credit, not here in Philippines either, where massive ramp up in offerings for credit cards.

Mish quoted:
"The volume of debt issued around the world plunged in the third quarter to just a quarter of its level in the preceding three months, latest Bank for International Settlements (BIS) data indicated Sunday"

I suspect they are referring mostly to western private debt, and did not include the public sector debts, bailoops, and stimulosts.

I am looking at your chart for the 16 conditions that determine whether we are in inflation or deflation. I can see you have missed the most important indicator: GOLD. If the price of gold is rising relative to the senior currency, this is sign of negative real interest rates and thus inflation. The rising value of GOLD is only deflation for those who hold gold, which is no longer the broad population unlike how it was in 1929.

By suppressing the price of gold for 3 decades, by leasing gold from the Central banks and complicit selling of 100 times more paper gold and silver than exists, the strong dollar (fiat) proponents have been able to create the illusion that we are in deflation in terms of some of the 16 metrics on your chart:

"Falling Treasury Yields"
"Rising Dollar"

However you have other items on your chart marked incorrectly. Some of those you marked "Y" were only "Y" for a very short blip of time, and have been since 2001/3 and continue to be "N", e.g. commodity prices.

Also "Negative GDP" only applies to deflation when it is measured in gold. If the GDP is falling as measured in a fiat (which I think it is not?) untethered to gold, that will be inflationary, because of the public sector's ability to steal from savings accounts with the printing press. And this is happening, as measured by the non-liar CPI, the true unemployment rate, and thus declining real wages. That is inflation.


The focus of the missive linked above is irrelevant. I agree the banks are not going to lend into western credit markets. But that is irrelevant as to whether we will see inflation or deflation in the real wages (cost-of-living) for westerners.

What matters is for how long the public sector can continue to finance the loss of the private sector without interest rates increasing. Or for how long can real interest rates remain negative. For when this shifts, it will be similar to what happened to Greece but on a much larger scale.

Once that shifts, there will be a stampede to gold and silver, and the bonds and dollar will be revealed as a ponzi scheme of global confidence.

By that time, the banks will have completed the transfer of all the toxic assets to the public sector (because we are too stupid to buy gold and silver now to stop them).


What didn't work? We have inflation every where in cost-of-living.

> Gold

First time I read this.

Mish wrote:
"Many of those misconceptions stem from gold's dual role as a commodity and money"

Gold is not a commodity, but seems you agree...

Silver nearly reached commodity behavior, because the total annual mining market cap of silver is a tiny $10 billion. In other words, the monetary use of silver (and thus its real price) is just rising off all time low in the history of the world. This will only last as 99.9% of people believe and invest as if TIPS and CPI are accurate metrics of anything but mass delusion.

Mish wrote:
"In short, the total potential supply of gold is some 97-98% greater than the gold produced every year (approximately 2,600 tons).

On that basis it makes no sense to apply traditional commodity supply/demand analysis based on annualized trends in the gold market"

Excellent. I agree with you.

Mish wrote:
"We can therefore conclude that there must be a source of gold demand that is of far greater importance than the jewelry and industrial demand components, and that demand constitutes the true driver of the price of gold in terms of fiat money"

Excellent. And this applies to silver also.


Thanks for sharing the 17 year, -0.28, lack of strong correlation between dollar and gold.

Mish quoted:
"over the last 20 years while gold has gone up in USD terms by 58%. So has gold been a hedge against inflation over this time frame? Of course not - stocks have been a better hedge against inflation than gold, and property even more of a hedge than that"

Gold has outperformed stocks since 2001. The reason gold did not capture inflation for the prior 2 decades, was because the central banks were dumping their gold in order to maintain the fiat illusion. We are going to pay for this past transgression, with coming hyper-inflation relative to fiat and deflation relative to gold. This transgression so badly mis-allocated the world's capital, that fiat and political system is broken beyond repair.

Mish quoted:
"But that is not to say that gold doesn't have its uses: gold will likely be a fantastic wealth preservation vehicle once the fiat currency regime (the post Bretton Woods system with the US as global economic hegemon) comes to a grinding and ignominious end (a certainty approaching 1 on the probability scale - timing less certain)"

Exactly what I wrote above.

Mish quoted:
"Gold is a poor hedge against major inflations."

Tell that to people who escaped with their gold from Weimer Germany. Find a chart of the gold price in Weimer Germany or Zimbabwe. The above statement is false.

Gold does not bother with minor inflations that will self-correct. Gold is warning about hyper-inflations that can not be corrected, because they are systemically guaranteed. The penalty for not paying attention can be severe, even life threatening, because Gold does not waste its energy on small matters.

> I am not measuring relative net worth to anything.
> Never attempted to do it.
> Nor do I advise attempting to make long term bets on either deflation or
> inflation.
> This is a traders market

Traders who don't hold physical gold with tight hands, will be wiped out.

The price for not understanding what is going on, will be catastrophic.

> As to why credit matters.
> Look around for christs' sake.

I am looking and I see inflation and increases in cost-of-living. And this is with the public not even the least bit worried about inflation (TIPS metric). Just wait until the stampede begins as they realize inflation is killing them.

> When credit collapsed asset priced got clobbered
> That was the result of deflation.

But did it cause cost-of-living to decline any where more than wages declined?

Sure many investments deflated, especially when measured relative to gold. We probably do have deflation relative to gold (or we will eventually once the suppression of gold price ends entirely). If the world was using gold as money as in 1929, we would have similar result as that period with deflation and increased consumption (as is documented to have occurred from 1929 to 1933 according to Howard Katz).

> I have people like you saying "this does not matter"
> Bullshit
> It affects jobs, wages, asset prices but perhaps not the price of peanut
> butter.

Yes jobs being lost, wages declining, while prices do not decline enough. That is inflation.

> It is nuts to preach inflation when jobs, wages, asset prices are
> screaming
> deflation.
> That IS what matters.

What matters is what people can afford. Deflation means people will be able to afford more. It means interest rates are high enough to stimulate increases in production. It means the economic balance is improving.

Whereas, inflation means people can afford less, interest rates are too low, so the imbalances are still increasing. This will result in a crack-up boom or hyper-inflation.

It is critical to distinguish correctly between the two very different scenarios.

> The land price in the Phillipines is riduclous to even discuss in the
> grand
> scheme of things.

Look at a chart of world GDP. The developing world is I think much more than 33%. And this is before the western GDP has been marked-to-market, which will come eventually and result in hyper-inflation of prices and hyper-deflation of the value of the dollar relative to gold and the REAL productive economies.

It is very relevant to discuss how inflation is behaving in the majority of the world's REAL productive economy.

> I really get tired of explaining this 500 times on my blog and then
> another
> hundred times in long emails like this
> I am very generous with my time, too generous.
> I spend 305 hours a day answering emails

You are indeed very generous. We would not be able to have this degree of understanding of our differences, if not for your tireless effort. I do not say that with a smirk. I genuinely feel your effort and good will.

Sometimes we become so attached to an idea or concept, we can not see over the forest.

Perhaps it would be best if we could agree on an enumeration of our differences, so we could refer people to the different position and arguments, so this doesn't have to repeat over and over again in emails. It would also help to give people different ways to think about the issues, so they can form their own conclusion with complete information. I am not trying to pressure you to do, but it might be in your own best interest, as one way to diffuse overload on you, is to give the opposers a voice and so to remove yourself as barrier to information flow. I realize people are free to publish, but this is the price of gaining influence and popularity. People view your market reach as public property in a sense. I respect your private property, but argue it may be in your best interests.



> If you think silver is going to $1000 you are seriously nuts.
> I have no more time for this nonsense.
> I have wasted enough time already
> Mish

I am not betting on that, but I will bet it goes north of $50 again. I assume a high probability of 3 digits, and who knows how high from there.

What am saying that is that we will see hyper-inflation or a fix of the fiat to a very high gold price, but we don't know how silver will perform at the juncture, because silver lost favor in Weimer Germany at the point where people had to flee and silver was too bulky.

Also I suspect the fiat controllers really hate silver, because they can not easily mop up the heirloom silver which is significant and more than 1 oz per global capita (and more than that since it is concentrated in the west). So they will likely do their best to cause it to be a poor investment vehicle, perhaps with extreme run up in price and then a crash when they fix gold to new international monetary unit, but not silver. But maybe it won't work out as the central planners hope. A war might change the dynamics considerably.

But that is all speculation. I can only speak to the facts about silver as I have relayed to you.

I can say that it is going to be very dangerous period to own anything, including metals.

> one TINY point
> there will be no industrial demand at $1,000 an once

This shows you are ignorant about the silver industrial market. Silver is used in trace amounts where it is the only metal that can be used (for example anti-bacterial threads in military clothing and filters in washing machines, coatings on ball bearings in aviation, coatings on relay contacts, etc), and even if the price goes to $1000 it would not affect the profit or end product price significantly.

> None
> You hyperinflationist clowns never bother to think through the
> implications
> of the pure nonsense you are spouting.

We have been thinking. You apparently haven't been reading, because apparently you think you already know everything.

> $1,000 an ounce.
> Yeah right
> sheeesh
> Mish

> They are liars or fools

Why should they bother to sell a few $100s worth of silver that won't sustain them (the gas and their time will cost them almost that much), when it is the lasting memory of their parents and of an era that was more simple and better.

The heart is more powerful than most material needs. Actually I think my mom said she would sell it if it meant life or death, but that is only scenario.

Some people are selling, especially when it falls into hands of the children via inheritance.

But it going to take a long time to mop up 20 billion oz of heirloom silver. It won't be coming to market all at once and in time to supply any significant increase in monetary demand.

Just contemplate for a moment the size of the bond markets and degree of confidence in the bond markets (e.g. TIPS spreads). A 0.01% shift in that could wipe out 20 billion oz at current prices.

> On Mon, May 10, 2010 at 2:35 PM, Shelby Moore wrote:
>> My mother and others state they wouldn't sell their heirloom silver at
>> any
>> price.
>> From my prior study of the silver supply:

Subject: Hyper-inflation begins when all loans are off the books of the Fed member banks

The point of stalling the economy was to force the public sector to take ownership of all the loans (on the 2nd round in 2011, many or most of the prime mortgages will also fall into default). It also defaults the private banks, so they can be eaten by the Fed member banks. Much of that was completed in the 1980s Savings & Loans consolidation, and it is coincident with the consolidation in mass media which has fallen from 1000s of owners to five families.

In the bankster business model, they don't begin the hyper-inflation until they no longer hold loans, and only hold desired assets:

In other words, the reason banks are not lending, is not because they fear deflation, it is because they fear inflation. The creditor is the looser during inflation, not the debtor. That is why the big push to default the debtors and make the govt the creditor. Then convert the debtors to rent slaves.

The good assets (the collateral) on the Fed balance sheet will be sold back to Fed member banks for pennies on the dollar, while any attached obligations will be inflated away. The hyper-inflation will wipe-out everyone but the Fed member banks.

It is a business. A racket. Don't be so naive.

The public's only viable weapon is gold and silver (certainly not politics or the law), but not if only 0.1% of the population are acting and if most analysts are naive and advising to buy bonds.


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Inflation or Deflation? - Page 15 Empty Follow up clarification to Mish

Post  Shelby on Tue May 11, 2010 11:52 pm

Shelby wrote:...The good assets (the collateral) on the Fed balance sheet will be sold back to Fed member banks for pennies on the dollar, while any attached obligations will be inflated away. The hyper-inflation will wipe-out everyone but the Fed member banks...

I suspect this is why they needed unsecured/unregulated derivatives, so they can remove the secured asset from the asset of the expected return from the loan repayment. The Fed member banks will end up with the secured asset's hyper-inflated value, while the public will end up with the deflated asset value of the defaulted loan or of performing loans which are nearly worthless in hyper-inflation. I found it interesting that a wrinkle developed where the banks didn't keep sufficient paperwork and thus were not allowed to repossess secured assets, but I don't know how widespread or persistant this is.


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Inflation or Deflation? - Page 15 Empty No deflation until the back the fiats with gold

Post  Shelby on Wed May 12, 2010 11:23 am

Shelby wrote:I don't have anything to say about the short-term, gold could go up or it could consolidate, but I am sure we don't have deflation and we won't have (sustained) deflation until they back the fiats with gold. Until Derek understands this, he won't be able to get the long-term trend correct.

You must understand that a shrinking private sector, supplanted by a growing public sector, is always inflationary. Decreasing private production yields less supply and thus higher prices. Decreases in private share of total pie of money/credit/debt outstanding, means higher prices for the private sector. Deflation means lower prices, and positive real interest rates (i.e. falling gold price). Inflation means higher prices and negative real interest rates (i.e. rising gold price). Those who can't understand this, will not be able to understand the trends.

If you need more detail on this (read all the way to the bottom of the page for detailed understanding):

Derek, regarding your link:

"Furthermore, those disasters were intentional; the oil spill was, quite obviously, an accident."

That is false. The Valdez spill was intentional. Do some research on the captain and the circumstances of the incident. My father was the West Coast Division head attorney for Exxon during that time. Do some research.

Why was it intentional (to rally the environmentalists at the cheapest possible cost)? Well that is for you to speculate, but note that the USA is now dependent of foreign oil, which will help insure the coming hyper-inflation. :wink:

Also the oil price drop may have been a margin call by the those bet against the outcome of the Greece bailout:

"That mattered because a couple of major hedge funds are said to have borrowed heavily to load up on high-yield Greek debt over the weekend in anticipation of the EU deal. The attack on that debt on Tuesday was so successful that the unfortunate hedge funds received margin calls, which forced them to raise cash quickly. They had to sell both their new debt positions at big losses and to dump a wide variety of other holdings, such as oil, gold and stocks. This explains why oil crashed $4, seemingly out of the blue, at a time when supplies were actually constricted due to the Gulf of Mexico drilling rig disaster."


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Inflation or Deflation? - Page 15 Empty Only a fool shorts during massive inflation

Post  Shelby on Thu May 13, 2010 12:27 am

Shelby wrote:You can't make real (adjusted for inflation) money, by shorting anything, when inflation is running at 33+% per year (read from that link to end of page for full justification of the 33+% assertion):

You fools! Gold and silver just jumped +18% and +33% off their February lows! And your shorts are losing money. By the time the market consolidates, you will be another year of inflation behind us.

Shelby wrote:Even shorting things that will do poorly in inflation (e.g. bonds that have negative real interest rates) won't work out, because the inflation is precisely being sustained by the public's (market's) ignorance about those poor investments. And when the public's perception turns, then there won't be a solvent counter-party to pay your bet.


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Inflation or Deflation? - Page 15 Empty It ends with an unsustainable strict global gold standard

Post  Shelby on Thu May 13, 2010 3:33 pm

Shelby wrote:I agree with Ray ("R N") and the prices won't move in a straight line, but I can assure you we won't have deflation until the currencies are fixed to something that can not be created out-of-thin air.

I expect the fiats to be fixed to a very strict gold standard at the end of this chaos, because strict gold standards don't work long-term, and so this will play into the plans of the elite. A strict gold standard will be extremely deflationary and will also be the only way to restore order after the chaos coming. It will destroy the nation-states and be implemented by world authority (e.g. IMF, world bank, BIS, or their successor).

Shelby wrote:Note we may see more liquidity crisis, and it is possible the Fed may play chicken with the Congress again, and let the thing slide into what looks like deflation for a few months, but there won't be any sustained deflation for as long as the banksters haven't completed the hyper-inflationary step which is required for them to maximize their theft:

Then they will reset everything to strict gold standard, so that they can be paid interest in gold and mop up the remaining physical gold in world.

After they have all the gold, they control every human being with a chip implant. You will not be able to buy, sell, or eat without their computer's permission. I am not sure if that comes in my lifetime, but I think so, perhaps about 20 - 30 years from now (because time is accelerating due to exponential function, e.g. Moore's Law the power of computers doubles every 18 months, i.e. the curve of computer power looks like a parabola).

What can you do about this? Remember what was written in 1 Samuel 8. Never have a govt, or eventually you will be enslaved. So the only way to be free, is to want nothing on this earth (especially no govt and central organization). To be free, you have to live free and decentralized (disorganized). Try to spread it by your actions.

The worst think you can do is once the gold suppression has ended, is to continue to hoard gold. Set it free. Don't be greedy. Get the capital into as many hands as you can, so that we can have more diversity and less centralization going forward.

You don't realize how one person can make an exponential difference. If you influence 10 people, and they each influence 10 people, etc.. Then after 7 ripples outward, you influenced 10 million people. A truthful message/action will grow stronger as it ripples out and not be diluted.

Shelby wrote:Ray,

Please re-read the math I presented, to understand why a rigid gold standard will not tie the hands of the elite and in fact will serve to funnel all the remaining physical gold to them.

It will be a mopping up period.

You keep writing in a condescending tone, yet seems you can't read or can't understand a simple exponential mathematical concept. If the mining rate for gold as compared to the above ground supply is say 2%, and if the interest rates go to double-digits, then if the money being paid as interest is rigidly fixed to gold, then those who are loaning money, will be gaining more gold as a % of above ground supply every year. And given the elite retain the power to crash the economy and cause the other banks to fail, so they can acquire them (and other means of aggregating all the loans being made).

Also you seem to not grok that the lowest entropy systems are the most unstable and weakest (i.e. the world order that elite are striving for will only last 7 years). I would rather educate someone in the 210 IQ range on the subject:

Last edited by Shelby on Sun May 16, 2010 3:19 am; edited 2 times in total


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Inflation or Deflation? - Page 15 Empty Summary of this thread

Post  Shelby on Thu May 13, 2010 11:44 pm

Shelby wrote:I was expecting gold to consolidate briefly at the break out to new high, so IMO here the chance to load up before the parabola run coming. But no one can be sure of the short-term direction of the price. Long-term I am sure.

Kiley, it doesn't matter if the Fed chooses to facilitate the creation of more dollars or not. Because if we stop funding the USA federal govt's deficits at treasury auctions (and soon state govt deficits too), then USA federal govt would default. This would cause a massive stampede from the dollar, which is the same as saying hyper-inflation in everything priced in dollars. It would have the same ripple effect on every fiat in the world, and thus it would be the endgame of hyper-inflation, with everyone stampeding to the safety of hard assets and away from bonds. Even 100% tax can't solve this:
(read entire page and entire subsequent page also)

Whereas, if the central banks continue to feed the govt deficits then we will also see increasing inflation, eventually resulting in hyper-inflation because there is no possible solution that stops deficits increasing parabolically. This is because the annual deficits and interest payments on the accumulated public debts are such a large % of GDP (production/private sector), that we now have what is called "negative marginal utility of debt". This means that the increases in debts (deficits), cause the private sector to shrink (GDP to decline), which thus increases the deficits even more. This then accelerates the negative marginal utility of debt (shrink in GDP due to increasing debt) even more. In other words, the acceleration of the implosion of the private sector. This can not be stopped, because it the result of decades of mis-allocation of capital by interest rates which were too low, because the elite were suppressing the gold & silver prices (by making silver coin not money in 1964 all over the world, by selling central bank gold, by selling short 100 times more paper gold & silver than they have, etc):

Also explained in my comments at end of this:

In short, hyper-inflation is already guaranteed, it is only a question of when. By doing QE, the central banks are delaying it, but they are making it much worse, by increasing the size of the public sector (debt, i.e. mis-allocation) and depleting the capital of the private sector. The deflation that follows the hyper-inflation will go much lower. The entire world will nearly depleted of capital. You gold & silver owners will be so incredibly wealthy, that you will be targetted by the masses. It is in your interest to convince as many people as possible to start buying metals with 2 fists.

Shelby wrote:Another way to wrap your mind around "negative marginal utility of debt" is to look around you and see that most people are in useless jobs. We don't really need what they produce. This is what mis-allocation of capital has done. It has created an economy where westerners produce nothing (except in the high tech sector), and China produces too much junk (at near 0 profit margins) that fills storage units across boomer land. Thus the truth is coming (either slowly by central banks fight it) or quickly (if central banks stop buying govt bonds). And that truth will result in everyone realizing the society and thus the govt is bankrupt, and thus running from the govt's bonds. That is hyper-inflation because then no one will trust the currencies of those govts. So really the only thing delaying the hyper-inflation, is the coming stampede to the truth.

After that hyper-inflation, then you everyone is in hard assets or destitute (if they have none), and that is then deflation, because interest rates will be skyhigh and private sector will start to grow again, but from a very, very, very low level.

People get confused. They think a shrinking private sector means deflation. Wrong! Shrinking private sector is inflation! Why? Because production is declining, meaning less supply meaning higher prices. Duh!

Shelby wrote:For as long as the currencies are not convertible to a fixed quantity of gold and/or silver, they will continue to decline in value relative to these metals. They can go all the way to 0, because of what I wrote in the prior 2 posts. At some point (after they have squeezed all the blood they can, i.e. destitute everyone who doesn't have hard assets), it will be in the elite's interest to arrest the hyper-inflation and so that the private sector can start growing again. At that point, they will introduce regional or global currencies that are fixed to gold. The SDRs of the IMF already are. Ray is correct, the broad population will not convert these to physical gold (anyway, they will only have enough cash to get a speck of gold dust). What the population will want is credit. They will begging for loans and the right to pay back those loans with interest in a fixed quantity of gold (as the currency will be fixed to gold).

This will cause all the gold to be aggregated by the elite. Because if the interest rates are greater than the annual increase in gold supply from mining (about 2%), then it means on aggregate the banks are sucking up all the physical gold.

So the 2nd gold standard will be final one, that removes the gold we have now from the population. After that is complete, we move to the 666 described in Revelation in Bible. Humans will be completed controlled by the elite like cattle.

Shelby wrote:Ray it is important that you understand the fixing the new fiats to gold will be in the interests of the elite. The masses will be bankrupt so there is no danger that they will be wanting to accumulate gold. The interest rates will be skyhigh. The private sector will have shrunk drastically. Thus the people will be eager to borrow money because there will be so many profit opportunities in the private sector (especially outside the western world), and thus no one will be interested in gold, they will prefer to earn high rates of interest at the banks. In this sense, it will be 1980s all over again, but with a global private sector.

This will suck the remaining gold and silver out of the private sector, just as the period from 1980 to 2000 did, but this time it will be much more complete.

So yes there will be a gold standard, but it will be international and the common people will not be accumulating gold.

Someone emailed me this:


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Inflation or Deflation? - Page 15 Empty Refuting Fekete's deflation

Post  Shelby on Sat May 15, 2010 10:42 am

Dr. Fekete,

Hadn't emailed you for a few months. You deflation theme is wrong because:

(1) A rising gold price means real interest rates are negative. This means there is inflation greater than the interest rates. Also interest rates are rising around the world (China, Greece, all of EU will see their interest rates rise now, USA is next but perhaps after a 2nd round of mortgage defaults).

(2) Negative interest rates are ballooning the size of the public sector and cannabalizing the private sector, i.e. negative marginal utility of debt. Less production and less investment by the private sector means less supply and thus higher prices.

(3) Food and energy are poor examples because they are highly subsidized. Rather look at wages and property values in the developing world. They have not stopped climbing at double-digit rates. Just ask your average westerner if there is inflation, as their real wages are declining (that is inflation).

Any way, please decide what type of inflation and deflation are you defining. Of the gold price? Of commodities? Of 10x over-priced, credit saturated western real estate? Of cash-only developing world real estate? Of developing world wages in a predominately cash (no credit) economy?

(4) When the westerners wake up to the $100+ trillion insolvency, we will have hyper-inflation. And the banksters want hyper-inflation, after they have finished transfering the bad debts (derivatives) to the public sector and leeching out the desired secured assets (for pennies on the dollar) via the magic of derivatives:


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Inflation or Deflation? - Page 15 Empty Pricing

Post  Shelby on Thu May 20, 2010 9:45 am

Shelby wrote:Ray, that is true, except for the statement "Therefore it can do anything that those 'behind the scenes' with the real information want it to do.".

There are actually physical limits, because some are taking physical delivery. The manipulators have to work within those limits.

What they will do is move the price around to extract the most profit possible, or other macro or inter-dependent objectives they have, but they do have to factor in the counter-effects of moving the price (too much or not enough or too fast or too slow) in either direction. Pricing controls all effects in markets, so they have monitor all the effects they are interested in. All this mis-pricing (deviation from what the free market price would have been, i.e. interference with normal feedback loop of pricing) is what is causing massive mis-allocation in the world, which will lead to shortages and inflation, and then when confidence in financial system implodes-- hyper-inflation. Mis-allocation also causes over-supply in other things, thus causes somethings to be too cheap. So shortages in some things, over-supply in other things.

Shelby wrote:Another thing to keep in mind Ray is how unstable a system is that has 20,000 tonnes perched on the head of needle.

99.9% of gold and silver investors are atop that needle head, ready to fall into the abyss, because they don't hold title to real metal. Once a few start to stampede, it will unravel. Then there will be no controlling the physical price.


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Inflation or Deflation? - Page 15 Empty Summary of my conclusions about inflation

Post  Shelby on Fri May 21, 2010 10:49 am

Please email this to everyone you know. Email it to every analyst. This is a summary of my macro-economic research over the past few years.

Here is the chart you need to be looking at now, which is screaming "BUY GOLD NOW!!":

Inflation or Deflation? - Page 15 Tacinv10 <--- Click chart for full article

And for a wider view:

Inflation or Deflation? - Page 15 Kibar110

Inflation or Deflation? - Page 15 Gdp-re10 <--- Click chart for full article

In the above chart:

  1. green line is reported annual real (inflation adjusted) GDP growth (nominal and real are reported as same now, as CPI is reported so low)
  2. blue line is govt's annual budget deficit (spending - borrowing)
  3. red line is green line minus the blue line, i.e. the actual GDP growth generated (above & beyond debt taken on)

As if the above wasn't already catastrophic, the truth is actually much worse. The blue line is cash accounting, not accrual accounting:

With accrual accounting, I estimate based on data from link above, that the actual GDP growth is about -60% per year!! In other words, if entitlements are marked-to-market, we will be at 6% of our original private sector within 3 years (0.40 x 0.40 x 0.40)!!

Even worse, the green line is a reported lie, because the inflation is under-reported. Actual real GDP growth is -2%:

And even worse, the chart above does not include state govts and private sector debt, which are probably both increasing.

So actually the private sector GDP (the actual GDP after subtracting debt taken on by the govt) is some where in the realm of -80% per year (maybe in the -90s%), so by 2012 and when the stampede occurs that marks-to-market everything (and when the bankster elite have transferred all the debt to the public sector and are ready for the hyper-inflation,, then the private sector will have shrunk to something like 0.20 x 0.20 x 0.20 = 1%!!!!!!!!!!!

The reason you can't see this implosion yet in USA is for the same reason silver is not yet at $100+ (given 99% silver investors have an empty promise, not silver):

It is because nothing has been marked-to-market yet. The public still believes the lies, as evidenced by TIPS reporting that is inflation is low.

Denninger has most of the facts correct, but he makes the wrong conclusion, expecting deflation, because he only looks at the demand destruction. He forgets that all of this is mis-allocation of capital and so supply will also be destroyed. Actually supply of somethings (houses and a slow form of euthanasia "health care") will be too much and other things that depend on credit, energy and their long-term investment, will go into shortages, i.e. food:

Shelby in email to Denninger wrote:Demand destruction yes, but what about supply destruction?
And what about the need to flee the mis-allocation of fiat to survive?

You are wrong about monetary deflation (it is also why you are wrong about gold), except as priced in gold. Gold is the regulator of interest rates. You must pay attention to what gold is telling you. And you must learn that mis-allocation of capital does not only affect demand.

(also read this entire page above) (read to end of page, including debate with Mish Shedlock) (How Deflation is Inflation) (about China, read to the end of page)

The point of the above, is that the private sector (people) will be forced to flee the fiat system in order to survive, at least until the elite back a new reserve system with gold (SDRs with Amero, Euro, and Yuan at parity). A flight from broken fiat system is hyper-inflation. In terms of gold, there will be deflation.

However, I caution you to not try to become entirely self-sufficient (as it is very inefficient), as Hommel so well stated (instead try to be a in place where you can trade for what you need and focus on producing and doing what you do best):

Again I want to re-iterate that we are heading into a tempest of horrific proportions. Expect at some point for silver to skyrocket, but remember to take profits, because for this chaos to end, the elite will have to lock a reserve currency to gold to defeat the barter chaos that will drive silver bananas (the elite can mop up gold with usury but can not mop up silver, also

Also in some jurisdictions one may need to flee and too many kilos of silver could be a hindrance (unless you have secret long-term storage already planned out, that relies on no entity that the elite know about).

ADD: I want to take a stab at refuting this claim that the Euro situation is not that big of deal:

Gerbino is making several assumptions which seem wrong to me:

  1. Austerity will reduce GDP, reduce tax payments, and thus snowball the amount of debt assistance needed ($4.2 trillion will grow exponentially as the GDP implodes on itself, due to austerity which will thus drive need for more austerity). The $4.2 trillion is a static figure that does not reflect what % of these economies is non-competitive in the world without the govt debt spending subsidy.
  2. Buildings and factories backing debt, does not mean 70% of the debt is payable. An over supply of building and factories for non-competitive, redundant debt subsidized production, is worthless. Infrastructure can't be eaten, and it can't be used for production that is more expensive than China. I think Gerbino is failing to understand the level of mis-allocation that debt and too low interest rates creates. To look only at the tip of the iceberg ($4.2 trillion) is foolish.
  3. Restructuring of debt for longer-terms, means either that the bond holders are getting shafted by fiat decree, or much higher interest rates will be paid out as compensation, and in either case, either way the market is going to extract higher yields from Euro-wide bonds, thus forcing Europe's already extremely high debt load even higher due to higher interest on the debt. Gerbino's simplistic calculation assumes no market cost for this "restructuring", which I think is impossible for anyone who understands the way the free market works (routes around price fixing).
  4. Gerbino admits that he assumes the austerity programs must be followed. If they are followed, Europe will implode as the non-productive morass that it is, which will exacerbate the debt problem and the QE (inflation). Thus they won't be followed, and/or there is going to be so much strife and chaos, that business confidence is going to plummet. I just don't see how he sees this as a small matter. You don't do the wrong thing for decades, then it comes to a head and suddenly it is a minor thing that can be fixed with a little 10% haircut over 10 years.
  5. Increased tax collection (if successful and I doubt it, as people will stick their middle finger to the govt at times like this when they have nothing to lose) would further implode the economy (stealing from the private sector to give to the public sector always destroys the real GDP).
  6. The USA and UK are heading into a tempest and will drag down Europe with them. The whole world is interconnected/dependent now in terms of trade. Europe's decline will drag USA and UK down too.
  7. What is this guy thinking? We are heading into a hyper-inflationary death spiral of decades of western debt subsidies (hyper-deflationary if prices are measured in gold ounces).

Here is some more relevant commentary:

Hamilton chimes in with "it is inflation ahead as usual":

The difference between now and 2008 panic, is this panic does not involve fear about the world's reserve currency economy (yet)-- the US dollar. Thus this panic will be less severe in the short-term, especially relative to gold because the inverse relationship of the dollar to gold has been broken by the realization that the Euro is no more disciplined than the dollar (and the -20% drop in stocks is not having as a big of an effect on gold, now that DJIA/Gold ratio has broken trend in gold's favor heading for another plunge, see first 2 charts above). And long-term, all the fiats are in an unavoidable monetary inflation mode-- that is monetary as I have defined it in my linked discussion of inflation above (not a specific measure of supply of money, which is ambiguous). And by the time the panic does involve the US dollar again, it will be realization that fiat system is spinning out-of-control and there will be massive move down Exter's pyramid towards gold (and probably silver too with a vengeance). This is the ultimate "inflation expectations" that central banks keep their eyes so diligently on. Once public turns away from bonds worldwide towards gold, the parabolic move is on (hyper-inflation in fiat prices, or hyper-deflation relative to prices in ounces of gold).

But the final parabolic move will probably be drawn out or aborted at least once, before it finally blows out and up. Because we are talking about a huge inertia (humans don't like to change fast and will resist until overwhelmed by reality).

Yes, this month's flight from everything into cash (which still means US Dollars worldwide) has knocked the gold price 6% off its recent record high vs. the greenback. But compared with all other assets bar Treasuries, however, gold shows phenomenal strength so far. Oil is down 20%. Platinum is 15% off. Aussie Dollars have dropped 10%, despite paying 450 basis points above cash deposits at the US Fed.

Note silver only dropped about -10 so far. So appears silver is starting to assert its monetary role a bit, and silver has huge OTC derivatives (promises to pay) that can not be fulfilled. The other metals don't have this.

Last edited by Shelby on Sun Jun 20, 2010 5:19 pm; edited 2 times in total


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Inflation or Deflation? - Page 15 Empty USA has 1000% debt-to-GDP ratio! THOUSAND, not HUNDRED!

Post  Shelby on Tue May 25, 2010 11:43 am


Inflation or Deflation? - Page 15 Debt_t10 <--- click to read more

That should give you some idea that this is not a normal deflation nor inflation. This is death spiral for fiat debt system.

Clive Maund says this may be the best and last opportunity to sell dollars while they are strong:


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Inflation or Deflation? - Page 15 Empty Ben revs up the helicopters again

Post  Shelby on Fri May 28, 2010 5:10 pm

Bernanke restarted the QE only 1 month after he promised it was stopped:

ADD: someone emailed me that the following refutes that any swap lines have been used thus far and thus there may be another liquidity take down coming:

Federal Reserve Foreign Exchange Swap Agreements (USD bn) - Federal Reserve Bank of New York

Short-term is unpredictable, but the bailouts must come, else the fiat system disintegrates.


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Inflation or Deflation? - Page 15 Empty The gold story

Post  Shelby on Fri Jun 04, 2010 1:26 am

This article sums up most of my writings very well:


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Inflation or Deflation? - Page 15 Empty Re: Inflation or Deflation?

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