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Inflation or Deflation?

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Inflation or Deflation? - Page 21 Empty A recording you can use to explain to people who love bonds

Post  Shelby on Tue Feb 15, 2011 5:04 am

I made this someone who is a millionaire in bonds:

http://www.coolpage.com/commentary/economic/shelby/why_gold.mp3

Realize I am having a "foggy brain" day, so my coherence is not what it would be on a better day.

I am attributing this "brain diarrhea" day to eating pork over past few days for first time in year or more.

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Inflation or Deflation? - Page 21 Empty Very interesting...

Post  Shelby on Fri Feb 18, 2011 12:30 pm


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Inflation or Deflation? - Page 21 Empty bankrupt to millionaire

Post  Shelby on Sun Feb 20, 2011 10:51 am

http://www.marketoracle.co.uk/Article26118.html#comment100989

Shelby wrote:
Dan,

Assuming this is not illegal in your jurisdiction, assuming you won't owe tax on the forgiven debt, assuming you feel the banksters have looted our society and the value of money and thus stolen from us, gut your house of everything you can sell all for cash, the toilet, bathtub, doors, windows, etc.. Go buy 500oz of silver with cash, and hide it. Declare bankruptcy. Buy a $3000 used mobile home, then go park it some where free where you can grow your own food and catch fish. Wait. Within 10 years or so, you may be a millionaire (see my prior post I expect silver $400+ by then).

This video may be relevant to my justification:

https://www.youtube.com/watch?v=Cmg-41xACTA

Cheers.

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Inflation or Deflation? - Page 21 Empty gold vs. other options

Post  Shelby on Wed Feb 23, 2011 6:08 am

http://www.marketoracle.co.uk/Article25914.html#comment101221

Shelby wrote:
Hi Brian,

Here are some replies to your questions:

1) Anyone who buys on margin can lose several times their investment. Additionally, since most people are in net debt, they are effectively on margin, even if not in a margin brokerage account.

2) I do not need to use it in a store, I can sell it for fiat. Or even lease it for rents that disguise an interest bearing return for tax purposes. The end game is where the globalists back the new regional currencies with gold, and pay very high interest rates to suck all the gold back into the banking system, and gold will be convertible at the banks. There is even a video at the Fed showing this coming future. The globalists have started hinting at this. One of their code-of-ethics is they must warn you, before they screw you.

3) People comment because they want to distill truth.

4) Bunker mentality applies generally to all forms of preparing for outcomes that are paranoid, not necessary a nuclear attack, but the general concept of not respecting the perpetual march of the maximum division-of-labor trend.

5) Yes the globalists will profit handsomely on the rise of the gold price as they purchased back at $200s, and will sell for the new bonds that will pay 20+% interest in coming regional currencies. Who said bankers will get rid of currencies? Not me. I said the end game by around 2024 or before, is to destroy the national currencies and replace them with regional currencies and regional central banks, so that the globalists have more control and we can less affect them locally. But to get this, they have to sacrifice something temporarily. They will temporarily let gold come back as money, but not as a currency, only as a store-of-value and convertible at banks. This will enable them to raise interest rate super high, and then they bring the entire world (including developing world) into their next big bond bond bubble as they then slowly fractionally debase the gold backing while no one is paying attention. Then the death of the regional currencies (like today's crisis but some decades from now), will be the final end game leading to a one world currency and end times. This has all been known and planned for 2000 years. Do you want me to show you the public plans written about 100 years ago?

6) Agreed, they are monitoring everything.

7) Correct money can not buy salvation. Jesus said so in Matthew 19, that the only way to perfection is to give it all away and walk from this life of death, to the life of life. You are getting into the philosophical. Maybe we should stay on the financial.

8.) My point is I have to buy something. I can't buy $1 million of food. What do you suggest I buy other than gold and silver? Land is also illiquid. Stocks (and bonds) are losing value relative to gold and silver since 2001 and 2004 respectively. I don't think you can find anything but gold and silver. Eventually everyone will figure this out, and I want to be early.

9) Ah 1% now, but by the end game, at least 10%, as was the case in 1980. All mass psychology phenomenons have this pattern, and it is known as the exponential function. The early adopters profit the most. The globalists were the earliest as they purchased around $200s as they told the central banks to sell to them (such as Gordon Brown who sold away most of UK's gold). The central banks have stopped selling now.

10) Since gold can always be converted to fiat, then I can profit on silver by taking profits in gold. As for the time when real interest rates go skyhigh and gold and silver fall in price (the new regional currencies coming), then I can loan my silver and gold at 0% interest rate, and watch my ounces increase as fast as the fiat interest rate. Thus I capture all the gain (the loss in the price of silver) in terms of increased ounces, while my borrower pays a 0% interest rate, while everyone else pays 20+%. I detailed the math on this at the "How will we trade..." thread in Precious Metals forum (goldwetrust.forumotion.com).

11) Not sure what you mean here, but life does not reward burying money in any form. I am eager to lease mine (a form of investing in others' businesses), or invest it directly in their businesses as soon as possible.

12) Nothing on earth has a high above ground inventory relative to industrial demand, except gold. Second is silver. Copper and everything else isn't even close. Copper has only 6 month inventory above ground. This means it can never be a store-of-value, because it is primarily consumed and thus has no store-of-liquidity and thus is a very unstable value that is not orthogonal to economic conditions. You can Wikipedia "orthogonal", it is a critical mathematical concept.

13) The idea of profiting on catastrophe is that you profit because you help make it less of catastrophe by providing some needed function, such as storing up real capital in the form of real money, and only gold (and silver) qualifies because of #12 above.

14) The globalists want you to believe that paper is money. It is only an illusion. Paper money has lost 95+% of its value since 1900. One ounce of gold can still buy a fine man's suit, just as it could in 1900.

15) Agreed gold and silver are only tools, but when you have $1 million and no other suitable investment options, then they become your main tool at certain junctures.

16) Much better people will buy gold and silver than hoarding commodities. The sooner we kill the corruption of the central banks printing paper money like crazy, the less damage will be done to the world's poor. The more we delay, the worse it is going to be for everyone.

17) Money is the root of all evil, whether it is paper or gold or whatever. That is just nature. Nevertheless still doesn't tell me what to do with my $1 million?

18) It matters. If you put $1 million in paper in 1900, you would have less than $50,000 now in purchasing power parity. If you put it in gold, you would still have the same $1 million in purchasing power.

Cheers.

End game:

http://www.marketoracle.co.uk/Article20327.html

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Inflation or Deflation? - Page 21 Empty China bust?

Post  Shelby on Thu Mar 03, 2011 10:31 pm


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Inflation or Deflation? - Page 21 Empty no hyperflation, a volatile (yet persistant) transfer to gold instead

Post  Shelby on Tue Mar 08, 2011 7:40 pm

http://www.marketoracle.co.uk/Article26766.html

Shelby wrote:
Nadeem wrote:
"However the interest rate risks are transferred to the currency markets and this also suggests that the risk of hyperinflation is higher as the system is geared towards perpetually increasing debt until the bubble bursts amidst an hyperinflationary panic rather than mechanisms for less severe normalisation of debt due to just high inflation but rather an hyperinflation outcome."

This is because the currencies are not backed by anything (gold) that tracks the inflation. But hyperinflation is not sustainable when the whole globe is locked into it, because hyperinflation of commodities is unsustainable globally (no release value), thus we are certain to get bouts of renewed collapse, similar to 2008.

This is why only gold can retire the debt, so what we have is a process of transfer of wealth from those who don't have gold to those who do. The end game is those who don't have gold end up with about 1% of their purchasing power by 2021 or so.

The UK will not succeed in moderating this by 2015, that is pure fantasy. The fallacy in the GDP projection in part 1, is that it is not real GDP as measured against the increase in the gold price (the only true metric of inflation). This will become more evident as time goes on...

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Inflation or Deflation? - Page 21 Empty real vs. bankster hocus pucos

Post  Shelby on Wed Mar 09, 2011 11:03 pm

http://www.marketoracle.co.uk/Article26766.html#comment102402

Shelby wrote:
Nadeem, you continue to confuse _NOMINAL_ inflation with _REAL_ inflation. Nominal inflation is the change in fiat prices. Real inflation is the change in fiat prices minus the interest paid on bonds. Another measure of the real inflation is the price of gold. This is why gold increases when the interest rate paid on bonds, is lower than the increase in fiat prices.

I have written in numerous of my published articles on this site, as well as repeated in numerous comments I have made on this site as follows:

http://www.marketoracle.co.uk/Article26704.html#comment101931

"Gold stores more value than fiat, when the interest paid on fiat bonds is less than the (nominal) inflation rate, which over any sufficient period of time, is ALWAYS. Period."

So the point is that gold is telling us that the real inflation rate is much higher than the nominal inflation rate the govt is using to arrive at REAL GDP from NOMINAL GDP.

You see the globalists have you totally fooled, because they have convinced you to use nominal inflation and ignore the relationship between opportunity cost (bond interest rates) and fiat prices.

During the 1980s, the real inflation rate was negative, because the interest rate paid on bonds was double-digits and much higher than the rise of fiat prices.

And that is the entire crux of why the world is in the problems it is. Humans can not understand why gold is money, and fiat is not. I just explained why above. Fiat is the way the globalists deceive, steal, and screw up society. Why do they do it? Because we let them, and power is addictive.

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Inflation or Deflation? - Page 21 Empty Censorship

Post  Shelby on Thu Mar 10, 2011 11:41 pm

Nadeem has always published my comments, until the one in the prior message.

He can't handle the truth. He is owner/editor of marketoracle

This is why we need ssshhhout.com. A way we can add comments to any page on the internet, so the truth can not be hidden from each other.

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Inflation or Deflation? - Page 21 Empty China's inflation at breaking point?

Post  Shelby on Fri Apr 22, 2011 8:48 pm

http://www.zerohedge.com/article/china-inflation-and-wage-protests-spread-turn-violent

We know China has 1000s of protests per year, so not sure if this is significant.

China is raising interest rates and reserve requirements rapidly. All over the world, there is removal of central bank liquidity. We are heading into the next liquidity crisis after this blowoff top in commodity inflation.

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Inflation or Deflation? - Page 21 Empty China: mal-investment in the wrong places

Post  Shelby on Sat Apr 30, 2011 5:45 am

Socialism: Spending Other People's Money 101

http://business.inquirer.net/money/breakingnews/view/20110430-333823/Beijing-turns-to-currency-to-cool-inflation

Beijing also has resorted to the blunt tool of freezing prices of electricity and some other basic goods, but that is starting to backfire.

In the southeast, export regions are suffering power shortages that force factories to suspend production every other day. Power companies are squeezed between low state-set rates and high gas and coal prices, so they have avoided adding more generating capacity despite double-digit annual increases in demand.

"At the moment it is not very attractive to build an electricity plant in China and some regions have a shortage of electricity," said Louis Kuijs, a World Bank economist in Beijing. "At some point these administrative prices must be raised."

Chinese leaders have ordered local authorities to ensure adequate supplies of vegetables in markets and to pay subsidies to poor families.

In a possible effort to deflect criticism, it has imposed fines on retailers who it said cheated shoppers by overstating the size of price cuts on discounted items.

"I think you should have confidence in the Chinese government's capability in managing vegetable prices well," said a deputy commerce minister, Fu Ziying, at a news conference this week. He gave no time frame for when inflation might subside.

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Inflation or Deflation? - Page 21 Empty Dollar - Yuan will go to parity

Post  Shelby on Fri May 06, 2011 4:18 pm

I don't remember where I had posted about that, I remember hedy had replied saying a stronger Yuan would be good and I had presented some reasons why it would coincide with a depression for China. But that ultimately it would mean opening China up to the world and be good. Perhaps someone can find those prior comments and provide a link?

Let me now give the big picture I see. You know the big macro picture is what I enjoy trying to excel at. I think the TPTB want to take the Euro, dollar, and Yuan to parity. Since dollar index is mainly weighted to the Euro, this means the dollar index won't crash-- this will confuse many people. Instead, the dollar and the Euro will both collapse relative to gold, whereas, the Yuan will rise in value as it will be "as good as gold".

This will push us towards the regional currencies of the 10 kings, which will be convertible to gold at any bank. We will enter a period of great progress (with a gold backed world financial system) in terms of lifting the billions from poverty. But the transition period will be brutal on the middle class around the world. This rise of gold relative to Euro and dollar, is going to bankrupt the middle class in those regions. The Chinese middle class will see their net worths' decimated in terms of quantity of Yuan as their real estate bubble crashes and the depression that results from a strong Yuan, but the international purchasing power of the Yuan they retain will become worth 6 times more internationally. The Chinese will thus drive investment in the developing world, becoming consumers and their exports will move to high end and they will become importers from the rest of developing world.

http://www.gold-eagle.com/editorials_08/summers050411.html

P.S. the billions of poor lifted up to middle class is going to be incredibly bullish for silver industrial demand, where silver demand will triple annually at least.

Note also that 6-to-1 current Yuan exchange rate is approximately the ratio of salaries for the same jobs in developing world versus western world. Thus bringing the Yuan to parity with dollar and Euro, will bring parity in world's salaries. This is necessary to eliminate nation-states and move towards one world governance (the overriding goal of Rothschild and Rockefeller).

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Inflation or Deflation? - Page 21 Empty Kicking the can down the road, more money printing

Post  Shelby on Sat May 21, 2011 9:26 am

This should give a short-term lift to gold & silver prices until the Greece issue comes back around in a few weeks:

http://www.bloomberg.com/news/2011-05-20/imf-board-approves-36-8-billion-loan-to-portugal.html

IMF Board Approves $36.8 Billion Loan to Portugal

Portugal has until 2013 to cut its budget gap to 3 percent from 9.1 percent of gross domestic product last year. Photographer: Mario Proenca/Bloomberg

Yeah right. No country has been able to reduce budget deficits when they are running huge debts with rising interest rates coming.

You see what I mean about 2013 being the year that global economy implodes?

Btw, the USA provides most of the funding for the IMF, so that is the Fed printing $36 billion for Portugal. You see QE never stops, they just rotate the venues.

Greece issue is coming soon, which may be the impetus to drive dollar higher again and give us our bottom in silver, before they decide to bailout Greece:

http://www.bloomberg.com/news/2011-05-21/greek-government-bonds-slump-on-concerns-over-debt-restructuring.html

Greek Government Bonds Slump on Concerns Over Debt Restructuring

Greek government bonds plunged, driving up 10-year yields to a record, amid mounting bets the nation won’t be able to avoid reorganizing its debt.

Greek two-year notes fell for the first time in three weeks. The spread, or yield difference, between the 10-year bonds and similar-maturity German bunds widened to an all-time high. Fitch downgraded Greece’s credit rating to B+ from BB+, four notches below investment grade, boosting demand for the relative safety of German government bonds.

“We still have the backdrop of possible Greek restructuring, and concerns over that are driving peripherals lower and pushing spreads wider,” said Peter Chatwell, a fixed- income strategist at Credit Agricole Corporate & Investment Bank in London.

The Greek 10-year yield rose 113 basis points in the week to 16.57 percent as of 5:18 p.m. yesterday in London after reaching a euro-era record 16.59 percent earlier. The nation’s two-year note yield climbed 57 basis points to 25.46 percent. It reached a record 26.77 percent on May 12.

Greece’s budget deficit is forecast to exceed the 7.5 percent of GDP target under the EU-led bailout, reaching 9.5 percent this year, the European Commission said on May 13. The nation’s debt, already the euro area’s biggest relative to economic output, may reach 158 percent of GDP this year and peak at 166 percent next year.

Interesting interview:

http://www.bloomberg.com/video/68695152/

The difference between Asian crisis and EU crisis is that southern EU can not repay, they have no potential for growth.

The EU banks are all complicit in the southern EU crisis, thus they can not allow a true default without cause derivatives contagion throughout EU and the world.

This is why they are kicking the can down the road, so they will do some kind of restructing of Greece that do not involve mark-to-market to buy time. But as this Professor says in the interview, in about a year or so, the default is coming.

This is why I am saying that we are going to get the big blowup in oil in 2012 and then by 2013, we will have massive derivatives contagion and global implosion.

TPTB want to maximize the bang.

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Inflation or Deflation? - Page 21 Empty Appears we are in a duplicate cycle and 2011 is 2005 or 2006

Post  Shelby on Sat May 21, 2011 10:56 am

Ah here is the chart we need to see the correlation.

Notice we have a similar pattern on the blue and orange lines in 2011, as was in 2005, or perhaps 2006 if cycle has accelerated. And notice the yellow period in 2004-2005 corresponds to yellow in 2009-2010. Difference is appears the patterns are either accelerated (or we are only in 2005 now), which is to be expected as leverage and instability is increasing as we race towards the end game of global breakdown.

So as I have been saying, S&P will continue up and perhaps peak in 2012, just as it did in 2007, unless we are in 2005 now in which case peak could come in 2013.

This is why I will go long on silver here (at $30 or below). I also want to get ready for global collapse in 2013 or 2014 (but I lean towards the sooner date). I am becoming much more confident now of this.

http://financialsense.com/contributors/chris-puplava/global-slowdown-ahead-recession-not-likely

Our recession model typically provides several months warning before a recession begins and the 20% mark is often the line in the sand with only one false signal (1987) over the last thirty years. Given the current reading rests at a 3% probability of a recession beginning over the next 6 months, I am in agreement with the ECRI’s Lakshman Achuthan that a recession is not in the cards as of yet.

Inflation or Deflation? - Page 21 3-OECD-Data

Let me remind about this prior post:

http://www.gold-eagle.com/editorials_08/mchugh051411.html

Inflation or Deflation? - Page 21 Mchugh051411a

Another view of growth leading indicators doesn't provide a compelling picture that we are facing an imminent global recession:

http://financialsense.com/contributors/chris-puplava/why-bill-gross-is-wrong-in-the-short-term

Inflation or Deflation? - Page 21 02-ECRI

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Inflation or Deflation? - Page 21 Empty China can not reform its growth engine

Post  Shelby on Sat May 21, 2011 12:31 pm

http://financialsense.com/contributors/michael-shedlock/china-may-face-out-of-control-inflation

1)Yes, but not yet. It will take a decline in investment growth to reduce labor demand.

2)Yes, an increasing if still-minority number of economists now recognize that the growth model is unsustainable, although I am not sure all of them fully understand why it is unsustainable and the role of rising debt. For that reason, I think they misunderstand the nature and difficulty of the adjustment process. I suspect that after another year or two in which consumption growth continues to remain below GDP growth, there will be much greater awareness of how intractable the problems are.

More here:

http://globaleconomicanalysis.blogspot.com/2011/05/chinas-real-estate-developers-struggle.html

When I listen to the key man in china:

http://www.charlierose.com/view/interview/11663

I come away with the sense that they think they can solve the growth vs. inflation problem "by having everyone on the same page" (that is what he said). So clearly this is a model of totalitarianism. They are going to try to micro-manage the solution, by suppressing some sectors and subsidizing other sectors. It will of course fail horrendously, as it is a friction on the free market adjustments which thus won't take place.

So the conclusion is that inflation will get out-of-control, and it will take a year or two for China to burn itself to the ground with rampant inflation, before their growth model is proven to be unsustainable with a horrendous crash.

See prior 2 posts today.

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Inflation or Deflation? - Page 21 Empty China can't stop.

Post  Shelby on Sat May 21, 2011 6:56 pm

Shelby wrote:...When I listen to the key man in china:

http://www.charlierose.com/view/interview/11663

I come away with the sense that they think they can solve the growth vs. inflation problem "by having everyone on the same page" (that is what he said). So clearly this is a model of totalitarianism. They are going to try to micro-manage the solution, by suppressing some sectors and subsidizing other sectors. It will of course fail horrendously, as it is a friction on the free market adjustments which thus won't take place.

So the conclusion is that inflation will get out-of-control, and it will take a year or two for China to burn itself to the ground with rampant inflation, before their growth model is proven to be unsustainable with a horrendous crash...

At around the 30 min point, China's vice premier provided a list of 5 things that were different in comparing Japan and China, with respect to world trade.

He made 3 points that struck me:

1. Never before in history of world had the world's #2 economy had 100th country per capita wages.

2. USA willingly sold all of it's technology to Japan, but not to China.

3. China has no brand names known in the world, and most of the valued-added is not produced in China, for the products that China makes. (e.g. only $40 of the $400 iPod is produced in China)

Then I remembered that Chanos said that maybe the reason the Chinese elite are taking their money out of the country, is because they fear the ultimate failure of China and the resultant uprisings. Note that in the above linked interview, the Premier said that "uprisings can NEVER happen in China" with a very stern face. The Chinese elite understand that it is an all-or-nothing game for them.

Chanos says 70% of China's GDP is fixed investment. China's problem is how to move up the chain of technology and value-added. The problem is that China can't do that via exports, because it is not small population that can do technology for the rest of the world. It is nearly endless supply of labor.

Thus I conclude that China can not allow fixed investment to decrease. They have no choice. They will spend $2 trillion of their $3 trillion dollar reserves, before they will succumb to political suicide.

But what can they spend the $2 trillion on? They can't spend dollars inside their own country. And what can they buy external to their country that can help their people have jobs? (also when those $2 trillion are dumped on the world that means more inflation)

More fixed investment coming... I don't see any other way. They will do fixed investment until they are bankrupt.

And realize that China has immense private savings too. So there is no chance of a quick overshoot with interest rate hikes leading to a contagion. There simply isn't that kind of naked leverage in China.

China won't stop until it has no more savings or until that savings has run to gold and silver, which btw is accelerating:

http://www.zerohedge.com/article/chinese-silver-demand-surges-four-fold-just-one-year (silver demand up 4x in 1 year)

http://www.caseyresearch.com/gsd/edition/china-now-top-gold-bug

Inflation or Deflation? - Page 21 None%20to%201

Even if China expands foreign investment, this will likely be in developing countries, which will drive more demand for commodities:

http://www.zerohedge.com/article/china-proposes-cut-two-thirds-its-3-trillion-usd-holdings

...expanding overseas investment...

The fundamental issue is that as long as the dollar has very low interest rates, this will drive excess liquidity into China, for as long as China's currency is undervalued. China has only two choices, go back to poverty or spend those dollars on something. If China had allowed a free market in exchange, then its people would be all over the world finding opportunities, exchanging technology, etc.. Instead China's central control over the income earned by its people, means they are limited in terms of what they can spend it on.

China can not open its economy letting people come and go freely and move money in and out freely. If they do that, the uprisings will overthrow the elite. They have to keep their people ignorant.

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Inflation or Deflation? - Page 21 Empty Looks like we are headed into inflation madness in 2012

Post  Shelby on Sat May 21, 2011 8:50 pm

Unless this official data is a lie, I can't see a sign that China is imploding:

http://chinadataonline.org/freesource/zixunshow.asp?id=581
http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/1127942/1/.html

Inflation or Deflation? - Page 21 T4

They've had huge 20 - 40% growth in fixed investment, now it is easing a bit, but far from negative.

Looks to me that China is trying to cool commodity prices down, before they go spend their $2 trillion hoard on more.

China can't implode until it gets much worse, like hyperinflation, NPLs exhausting their savings, or the global economy (their export customers) fails.

The USA is not ready to roll over and cause the 2008 contagion (its coming but its still too early in the reflation cycle). And the EU is going to bailout member nations.

For sure China is wasting resources, but they started from a very low level and still only have 100th country in world level of wages. China will have to exhaust its resources first, but that is sort of hard to do when you keep generating more dollar reserves and surpluses.

When the rest of the world implodes, China is going to be hit hard with an oversupply of fixed investment, just as the USA was hit hard in the Great Depression after wasting money for example on Florida land. But I don't think China can lead the world down. China is not the tail wagging the dog. The USA is leading the world with its zero interest rate policy.

Surely China has huge NPLs in the fixed investment sector, but they have huge savings and reserves also.

If China collapses, Germany exports collapse, then the EU collapses. I don't think the central banks are going to opt for that outcome. I think they will prefer to fight for as long as they can with stimulus as needed.

I could be wrong about all this and the contagion and collapse could be imminent.

===============
ADD: EU and USA still account for about 40% of world GDP on PPP basis as shown below, thus EU and USA collapse is far more important than China for determining direction of global economy:

Inflation or Deflation? - Page 21 Chart4
Inflation or Deflation? - Page 21 Image001
Inflation or Deflation? - Page 21 Share+of+World+GDP+PPP

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Inflation or Deflation? - Page 21 Empty MATH: China's commodity demand MUST grow (plus rest of developing world)

Post  Shelby on Sun May 22, 2011 7:19 am

China has to choose between destroying jobs, or spending its reserves to soften the impact of inflation on the most vulnerable sectors.

I think China will opt for subsidies instead of free market pain, because the free market pain could spin out-of-control. Listening to the vice premier, one thing I think you can see clearly is China's leaders believe in "the oriental way", meaning they will not give up their control.

Appears most of the inflation in China is energy and food related, so perhaps China will increase subsidies in that area.

I bet it will be a combination of measures, it will cool the economy somewhat, use control to suppress protest by jobless or underpaid, it will increase salaries (inflationary), it will subsidize in marginal sectors that it can not shutdown (e.g. trucking).

Now here is the key thing you need to note. Even if they cool the economy, fixed investment is still growing at double-digit rates (note exception for planned investment below), thus commodity inputs are still growing at double-digit rates. Cooling means slowing down growth in fixed investment, it doesn't mean fixed investment growth will be negative. If something is growing at say 20-40% per year, it means it is that much greater demand for commodities as compared to the prior year. I hope Chanos closed out his short-bets or plans on holding them to the end game when China does implode, because China has too much cash and savings to implode now. And any fallback in commodity prices now is going to reverse as China's double-digit fixed investment growth continues to suck in more commodities (however, note the planned investment is down 1.1%, if this becomes a trend then Chanos is correct).

http://chinadataonline.org/freesource/zixunshow.asp?id=581

In the first four months of this year, the investment in primary industry, secondary industry and the tertiary industry went up by 12.6 percent, 24.6 percent and 26.5 percent respectively. Grouped by different sectors, in the first four months of this year, the investment in production and supply of electric power and heat power was 228.7 billion yuan, up by 4.2 percent; that in extraction of petroleum and natural gas 49.1 billion yuan, up 8.3 percent; and that in railway transport 141.5 billion yuan, up 26.9 percent.

Analysis on projects under construction or started this year showed that in the first four months of this year, the total planned investment in projects under construction reached 38,509.6 billion yuan, up by 19.1 percent year-on-year; the total planned investment in newly started projects was 5,338.9 billion yuan, down by 1.1 percent over the same period of last year.

In terms of funds in place for investment, in the first four months of this year, 8,637.7billion yuan had been invested, a year-on-year growth of 20.6 percent. Of this total, the growth of government budgetary funds went up by 7.8 percent; investment from domestic loans went up by 10.9 percent; that from self-raising funds went up by 27.2 percent and that from foreign investment rose by 14.9 percent.

Railroads are more efficient than trucking and create new opportunities along their lines.

So actually started construction is up 19.1%, but planned construction is down 1.1%. The tightening measures are fairly new. We have read else where that the construction firms are scrambling to find new sources of funding to keep up their growth in fixed investment. They are doing IPOs in Hong Kong for example, in order to raise foreign money. Apparently they are raising money from private sector and we've heard rumors of dollar carry trade, or this could just be internal private savings.

Let me not mince my words, I think China's experiment with central policy is going to fail horrendously, but I am trying to understand when they run out of cash (or refuse to spend it, which I doubt). When is China checkmated, where any new credit causes a decline in REAL GDP (negative marginal utility of debt), i.e. that inflation rises faster than GDP? Right now that does not appear to be the case, except in energy and food sectors. I mean China is getting close to that point and $175 oil in 2012 will topple China's economy, as it will also the global economy. But I think China is going to try to spend its cash before they go down in flames.

I think China is reseting the economy a bit before they unload their cash. The question is do we get some kind of global implosion before they do? How? The USA is not ready to implode yet. Germany's economy is strong. Etc. The nuisance economies such as Greece, Spain, Italy will be papered over. China will unload its dollar hoard.

My basic understanding is that none of the world can back off the accelerator pedal, because it is end game implosion when they do. I am thinking we have reached the point in the crackup boom, that it is too late to slow down, there is only one direction.

We are headed for inflation madness in 2012.

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Inflation or Deflation? - Page 21 Empty We are not facing a global implosion now, just a hiccup before worse inflation

Post  Shelby on Tue May 24, 2011 7:14 pm

We are still early in the reflation, and the govts are going to fight for their last stand before inflation kills their printing. The inflation we have now is not yet enough to bust the "lala land" head-in-the-stand state of westerners. China will not go down in pride without wasting its $2 trillion hoard first and causing worse inflation than they have now. EU will not go down without trying to keep their monetary union with lies to themselves while they slip the money under the table.

Let me add to my prior post, that I had been thinking that China would try to not drive themselves back into worse inflation, but the more I think about this, they will of course err to the side of spending that cash to "better their people". They firmly believe in a centrally managed economy being more ethical, fair, concerned, etc... They are deluded by their Confucianism.

And the EU will definitely not WILLINGLY allow disintegration of their union. Germany is profiting too much right now from exports-- their economy is booming.

Neither EU nor China is at the stage where they have no options and MUST "cry uncle". For as long as the kids have gun powder, they will use it. Don't you remember being a little kid?

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Inflation or Deflation? - Page 21 Empty Possible reason for pumping up the economy until 2012

Post  Shelby on Wed May 25, 2011 10:16 am

Statue of Limitations of 2007 securities fraud is 2012:

http://market-ticker.org/akcs-www?post=186709

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Inflation or Deflation? - Page 21 Empty Aha, I was correct to sniff out railroad as China's offset for slowing building

Post  Shelby on Sat May 28, 2011 3:49 pm

Tangentially, note there is a more complete (adds images and important links) and easier-to-read version of the essay Understand Everything Fundamentally.

Build more railroads to make all those excess buildings more utilized! China is trying to transition their economy to an information economy (knowledge and travel will increase according to Daniel in Bible). I still think Chanos is correct and China, will have a real estate crash at some point, but this "information and travel" capital investment will delay that crash (2013?), and then coming out of that crash, China will be a modern economy.

Looks like a good long-term investment, and a short-term fill in for cooling real estate sector, but medium-term I still think Chanos is correct.

This will have a powerful boost near-term on sentiment within China, as investors in real estate will visualize more progress and rises in prices ahead (euphoria feeds more euphoria).

Jim wrote:http://www.usfunds.com/investor-resources/investor-alert/?CFID=2589066&CFTOKEN=92999534

Investor Alert - Railway Revolution Builds China's Consumer Culture

Inflation or Deflation? - Page 21 COMM-ChineseBulletTrain-05272011Inflation or Deflation? - Page 21 CHI-HighSpeedRail-052711

http://www.marketoracle.co.uk/Article31232.html

The New Steel Silk Road

The project will include three major high speed lines:


  • UK/Europe to Beijing (8,100 km) and then extend south to Singapore
  • A second line will connect into Vietnam, Thailand, Burma and Malaysia
  • The third line will connect Germany to Russia, cross Siberia and then back into China


Financing and planning for this monumental project is being provided by China - who is already in negotiations with 17 countries to develop the project. In return the partnering nation will provide natural resources to China.

China's marathon long bridge to no where (an island)

http://news.yahoo.com/photos/china-s-jiaozhou-bay-bridge-1309439624-slideshow/

Inflation or Deflation? - Page 21 E51fd62d93389c0ef10e6a706700fb3f

My prior posts in this thread...


Shelby wrote:China has to choose between destroying jobs, or spending its reserves to soften the impact of inflation on the most vulnerable sectors.

I think China will opt for subsidies instead of free market pain, because the free market pain could spin out-of-control. Listening to the vice premier, one thing I think you can see clearly is China's leaders believe in "the oriental way", meaning they will not give up their control.

Appears most of the inflation in China is energy and food related, so perhaps China will increase subsidies in that area.

I bet it will be a combination of measures, it will cool the economy somewhat, use control to suppress protest by jobless or underpaid, it will increase salaries (inflationary), it will subsidize in marginal sectors that it can not shutdown (e.g. trucking).

Now here is the key thing you need to note. Even if they cool the economy, fixed investment is still growing at double-digit rates (note exception for planned investment below), thus commodity inputs are still growing at double-digit rates. Cooling means slowing down growth in fixed investment, it doesn't mean fixed investment growth will be negative. If something is growing at say 20-40% per year, it means it is that much greater demand for commodities as compared to the prior year. I hope Chanos closed out his short-bets or plans on holding them to the end game when China does implode, because China has too much cash and savings to implode now. And any fallback in commodity prices now is going to reverse as China's double-digit fixed investment growth continues to suck in more commodities (however, note the planned investment is down 1.1%, if this becomes a trend then Chanos is correct).

http://chinadataonline.org/freesource/zixunshow.asp?id=581

In the first four months of this year, the investment in primary industry, secondary industry and the tertiary industry went up by 12.6 percent, 24.6 percent and 26.5 percent respectively. Grouped by different sectors, in the first four months of this year, the investment in production and supply of electric power and heat power was 228.7 billion yuan, up by 4.2 percent; that in extraction of petroleum and natural gas 49.1 billion yuan, up 8.3 percent; and that in railway transport 141.5 billion yuan, up 26.9 percent.

Analysis on projects under construction or started this year showed that in the first four months of this year, the total planned investment in projects under construction reached 38,509.6 billion yuan, up by 19.1 percent year-on-year; the total planned investment in newly started projects was 5,338.9 billion yuan, down by 1.1 percent over the same period of last year.

In terms of funds in place for investment, in the first four months of this year, 8,637.7billion yuan had been invested, a year-on-year growth of 20.6 percent. Of this total, the growth of government budgetary funds went up by 7.8 percent; investment from domestic loans went up by 10.9 percent; that from self-raising funds went up by 27.2 percent and that from foreign investment rose by 14.9 percent.

Railroads are more efficient than trucking and create new opportunities along their lines.

So actually started construction is up 19.1%, but planned construction is down 1.1%. The tightening measures are fairly new. We have read else where that the construction firms are scrambling to find new sources of funding to keep up their growth in fixed investment. They are doing IPOs in Hong Kong for example, in order to raise foreign money. Apparently they are raising money from private sector and we've heard rumors of dollar carry trade, or this could just be internal private savings.

Let me not mince my words, I think China's experiment with central policy is going to fail horrendously, but I am trying to understand when they run out of cash (or refuse to spend it, which I doubt). When is China checkmated, where any new credit causes a decline in REAL GDP (negative marginal utility of debt), i.e. that inflation rises faster than GDP? Right now that does not appear to be the case, except in energy and food sectors. I mean China is getting close to that point and $175 oil in 2012 will topple China's economy, as it will also the global economy. But I think China is going to try to spend its cash before they go down in flames.

I think China is reseting the economy a bit before they unload their cash. The question is do we get some kind of global implosion before they do? How? The USA is not ready to implode yet. Germany's economy is strong. Etc. The nuisance economies such as Greece, Spain, Italy will be papered over. China will unload its dollar hoard.

My basic understanding is that none of the world can back off the accelerator pedal, because it is end game implosion when they do. I am thinking we have reached the point in the crackup boom, that it is too late to slow down, there is only one direction.

We are headed for inflation madness in 2012.

==================================


Shelby wrote:http://english.eastday.com/e/110501/u1a5867424.html



If China is going to prioritize industries that are less capital intensive and more valued added, then might this not increase demand for silver?

Silver is used in high valued added products and demand for precious metals increase during negative REAL interest rates when inflation rate moves higher than growth rate and forces shifts in priorities.

Also as China tries to morph their priorities, such as opening more to making foreign investment, they are going to drive fixed investment demand in emerging markets. Sort of a handoff of the baton.

However this will probably not go smoothly.

I am back to my point that I made a few weeks ago, that volatility is going to increase.

==================================


Shelby wrote:http://www.marketoracle.co.uk/Article28222.html

In the Scotiabank Commodity Price Index report for April Mohr said “Copper could still retest the previous US$4.60 record of February 14. Chinese copper fabricators destocked copper and produced 2.1% fewer copper semis in January and February due to credit restrictions and high prices. However a big seasonal pick-up in consumption in the second quarter will lift prices."
“We see renewed strength in the second half and you’ve got to be bullish copper for the next few years. The global recovery is becoming more broad-based and you’re not going to see any new mines coming on stream for at least this year.” Christin Tuxen, analyst at Danske Bank A/S

Australian equity research firm Resource Capital Research (RCR) said it expects the copper market to move from a small surplus in 2010 to a deficit of around 400,000 tonnes by 2011.

According to JPMorgan Securities Ltd, the world refined copper market will have a 500,000-metric-ton deficit in 2011.

Barclays Capital says copper demand growth will slow to 4.1 percent this year, down from 9.6 percent in 2010 - still more than twice the anticipated 1.7 percent expansion in supply. Barclays forecasts an 889,000 ton shortfall for 2011.

Infrastructure spending geographically:

Middle East $0.9 trillion
Africa $1.1 trillion
US/Canada $6.5 trillion
South America/Latin America $7.4 trillion
Europe $9.1 trillion
Asia/Oceania $15.8 trillion

China’s already found an area where it could rapidly increase public investment to stimulate growth - rail construction.

China's total investment in high speed rail was first reported to be about US$300 billion - the Chinese planned a 12,000km high speed passenger network supplemented by 20,000km of mixed traffic lines capable of 200-250kph.
Recent reports indicate that over US$600 billion will be spent on rail construction during the 2011-2015 Five Year Plan. By 2020 there would be at least 16,000 km of passenger dedicated high speed rail. The total rail network by 2020 would be 120,000 km - 80% of it electrified.
By early fall 2010, the Ministry of Railways announced that China had more than doubled the length of high speed track to over 7000km.
China has plans to construct its high speed rail line through Asia and Eastern Europe in order to connect to the existing infrastructure in the European Union (EU). Additional rail lines are planned into South East Asia as well as Russia – this will likely be the largest infrastructure project in history.
The project will include three major high speed lines:

UK/Europe to Beijing (8,100 km) and then extend south to Singapore
A second line will connect into Vietnam, Thailand, Burma and Malaysia
The third line will connect Germany to Russia, cross Siberia and then back into China
Financing and planning for this monumental project is being provided by China – who is already in negotiations with 17 countries to develop the project . In return the partnering nation will provide natural resources to China.


Last edited by Shelby on Wed Nov 23, 2011 8:17 pm; edited 4 times in total

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Inflation or Deflation? - Page 21 Empty China property developers double-down on their bubble

Post  Shelby on Sat May 28, 2011 4:01 pm

Jim wrote:Chanos, among other things, teaches at Yale.

http://www.bloomberg.com/video/70128022/

It is difficult to reconcile Chanos's bearish view on China with rising silver and copper prices ahead.

The property developers are now borrowing at 15+% in Hong Kong in order to keep their momentum going. This feels like a "doubling down" phase, where this sucker is rolling over but it isn't going to crash until the cash from the USA dries up. Even Chanos is feeding those developers by buying their debt while shorting their stocks.

So what it means is they will crash more horribly, but later.

Looks 2012 is going to be a very high inflation year, just as Gordon Lira expects (30% inflation).

Then 2013 is likely to be a global chaos and crash year.

Fed said they may tighten by July 2012.

The silver market is starting to sniff this out.

I am getting itchy to go long silver again. Next drop into mid to low $30s, I go long.

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Inflation or Deflation? - Page 21 Empty Next tipping point and ramifications?

Post  Shelby on Sat May 28, 2011 8:30 pm

http://www.kitco.com/ind/GoldReport/may272011.html

The United States is a bigger economic basket case than Europe. The entire European debt crisis is way overblown. Places like Portugal, Ireland and Greece are tiny. They would be the equivalent of Rhode Island and Alabama going under; that wouldn’t exactly take down the U.S. economy. In addition, Europe has such a bloated social welfare system that it can easily cut these expenditures. Also, Europeans, unlike Americans, are willing to pay taxes for government services.

The next part of the cycle is going to be very interesting, in my opinion. Because of the 2008 market and gold price crash the fact that everything rebounded together from 2009 to 2011, people think that gold moves with the market. However, I really think the next bear market in U.S. stocks will be caused by the weakening of the dollar and inflationary pressures. Therefore, I expect a situation where bonds go down in price, stocks overall go down in price and gold and gold stocks go up. In addition, I think that once people see that precious metals are the only game in town, this will allow the sector to attract more money.

I will now assert that the next tipping point will NOT be caused by China, but by the USA. When the USA implodes, this is what will pop China's and emerging markets overbuilding. China and emerging markets have far too much savings to pop on their own accord. The emerging markets are taking gold from the west every day, so the leverage they are building is backed by an increase in real reserves. But when they can no longer continue their siphoning of gold from the west, then their overbuilding has to be justified internally.

The roaring 20s (and wild real estate bubble in Florida) was caused by gold leaving war-torn and bankrupt Europe to go to USA. USA did not crash until 1929, when the gold flows had completed.

This is going to take a lot longer and be a lot uglier than most people are imagining. The USA has to be brought its knees with QE and massive inflation and the inability to politically make any adjustments. As Chanos said, health care is the only issue creating USA deficits and there is no political will to do anything about it.

See also my prior post today in this thread.

==============
ADD: Puru Saxena agrees:

http://www.gold-eagle.com/editorials_08/saxena052711.html

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Inflation or Deflation? - Page 21 Empty China's marathon long bridge to no where (an island)

Post  Shelby on Thu Jun 30, 2011 8:02 pm

Oh yeah, this is what negative marginal utility of debt looks like:

http://news.yahoo.com/photos/china-s-jiaozhou-bay-bridge-1309439624-slideshow/

Inflation or Deflation? - Page 21 E51fd62d93389c0ef10e6a706700fb3f

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Inflation or Deflation? - Page 21 Empty Permanently locked into stagflation until west is poorer than asia

Post  Shelby on Tue Jul 05, 2011 5:30 pm

http://news.yahoo.com/analysis-debt-deal-not-far-reach-050609211.html

Both sides have also taken a look at changing the inflation index, which could slow the growth of benefit payments and tax exemptions.

What this means is that Americans will continually receive less benefits in terms of purchasing power, due to inflation. While Americans will also support debt ceiling increases forever, because the alternative is they don't receive any benefits from the govt. This process will continue until the value of those benefits from the govt are so small, that no one has a vested interest in stealing from themselves any longer.

I predicted this in my "Inflating Deflation" article in early 2006:

http://www.coolpage.com/commentary/economic/shelby/Inflating%20Deflation.html

Isn't it amazing how stupid herds of sheep are? The people would rather take 10+ years to steal from their own future (by demanding benefits which forces the govt to lie about inflation adjustments), rather than bite the bullet now and lower their standard-of-living (real wages in terms of purchasing power), so they can compete globally.

Wasted decades in west. Pure waste, and the people can not even see that they are doing to themselves. Herded myopia, i.e. socialism.

the futures markets exist only because without them, the fiat couldn't exist. The apparent "liquidity" is necessary to to give the illusion that fiat is convertible (to gold and silver) and thus is real money. Of course this manipulation is demanded by the masses, as without fiat they couldn't steal from their future


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