binford xlIn the Keiser Report, Max Keiser and Stacy Herbert, discuss the good news for the economy as compensation payments for fraud trickles into the local economy and then they introduce the concept of the People’s Price Fix and a Keiser’s Hierarchy of Price Fixing. In the second half, Max interviews Professor Antal E. Fekete of FeketeResearch.com about Fed induced hyper-deflation and why the American Austrians were wrong to predict that quantitative easing would cause inflation.

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  1. I know PM bulls don’t want to hear it, but Fekete is correct.   Deflation is the main issue, not inflation.    Without credit expansion, QE does nothing to create inflation.
    Fekete has major credibility, this is not good news for the sector moving forward.

    • This is cost push inflation (value of the USD goes down), not demand driven inflation.  Demand is down yet prices are up (prices should be half with this low demand)  If we are in deflation (value of the USD goes up) the US Dollar would have a higher value and purchase more goods not less.  Gold is double year 2008 prices and over 5 times year 2000 priced in dollars. 

    • I hear ya Mikey. It’s even worse in Singapore, taking into consideration the exchange rate of course. At Carl’s Junior here, we pay SG$15.00 for a meal deal consisting of their top burger, criss-cut fries and large soda. Ouch! I used to eat out at a proper sit-down restaurant for that.

  2. sorry zman but you are wrong.  When the FED and all other central banks are working together to devalue each others currencies so one currency does not become worthless, that is manipulation. At some point the masses will lose confidence in the currency they hold.  It comes down to this once again. INFLATION/DEFLATION has very little to do with prices. You do not need credit expansion for a hyperinflation. Did you have credit expansion in Germany? Zimbabwe? all you have to have is a Central bank who will print trillions of it’s currency to pay bills. Has absolutely NOTHING to do with a credit expansion.  I believe we will have an inflationary depression/ hyperinflationary depression. that is where food, medicine, energy etc all go up but the price of your house will go down with no job to by the goods that you need. If the US Dollar was still backed by Gold then I could see a deflationary depression. Ain’t gonna happen. Fekete is an idiot just like WRONG all the time Prechter. If these douche bags were to have called the gold bull market etc I would givte them some credibility. Prechter missed the whole 13 year bull market in the metals. All he has done has got lucky and called the correction in the bull markets which I think he blindly stumbled on. Even a clock is right 2 times per day. Jim Sinclair has called it. Eric Sprott has called it. ETC. ETC ETC. Those are the folks I will continue to listen to.

    • @PoppaT
      “I believe we will have an inflationary depression/ hyperinflationary depression. that is where food, medicine, energy etc all go up but the price of your house will go down with no job to by the goods that you need.”.
      Absolutely true. I would even say that. QE could cause either deflation or inflation depending on who gets the money. Clearly in Fed. iteration of QE the money meant to go to the big banks who are going to use this cash to buy out assets for pennies on the dollar. Some assets will be bought directly, some through the trans-national corporations that these banks control. BTW, these process is unfolding in Canada where Canadian businesses in deep s$t are being bought by US monsters. Canadian Superstore is no longer Canadian. Zellers is out, Target is in. Rona goes out of business and my suspicion the Lowes will take its place. Next is the Bay which is going to be replaced by Macy’s. Occasionally they do put this cash in the commodity market to jack up prices on food and energy. Remember that the goal of Agenda 21 is to reduce your “disposable income” which by definition will cause deflation. From my perspective the banksters will try to spent this money outside the US to cause inflation abroad. That gives them an advantage. Remember the case with JPMorgan and Vatican where JPM accused Vatican in non-transparency. This is a joke of course, but to a point. It gives a chance to the Federal Reserve at some point stop the flow of money back into the country by declaring it money laundering operation and refusing to take it. Remember in the past there were a few scandals at Swiss-Italian border with US bonds. They claimed that some stupid criminals attempted to bring fake US bonds to Switzerland. Give me a break. Criminals are not stupid, at least not to that extend. So the banksters are flushing everyone down the toilet who doesn’t play by their rules. But, on the other side of the equation the dollar will become a hot potato. These people can pretty much pull any trick out of their ass because governments with enforcement agencies are in their pockets, military and and the media are controlled by them. Tomorrow they can change green buck for red buck and nobody would be able to do anything. They will exchange it to their friends and lackeys at 1 to 1 rate, to their enemies at 100 to 1 rate. Do you think Latvia or Iceland will be able to do anything?

  3. “will lose confidence in the currency they hold” Why?   If inflation is not an issue, confidence will remain strong.
    “I believe we will have an inflationary depression.”  Not in a developed nation, no way.
    What you can’t explain, why is there no inflation after the biggest global QE program in world history?   Fekete does a good job, listen to the interview.

    • All the talk about Inflation or Deflation is retarded unless people explain whether they are talking about Consumer Price Inflation or not.
      Property prices have soared over the last 50 years because of monetary expansion that has been directed by Finance Industry speculation. This means mortgages are larger for the same service (the privilege of having shelter over ones head or a premise to conduct business from), and it means the rents & fees that are passed on are higher. This is Consumer Inflation as everyone needs shelter. Since glass-steagall was dismantled a MASSIVE proportion of the credit expansion through fractional reserve facilitation was directed into housing and commercial real estate speculation. This pushed asset prices up so that the smaller guys had to borrow heavy $$$ amounts for commercial/personal assets (Inflation). When the market shat itself the wealth was not destroyed, the same debt instruments in the same $$$ denominations were passed directly to the Fed Balance Sheet to be ‘sequestered’ (a one way black hole, but a black hole that demands interest payments from consumers who use the collateral in the assets; houses, factories, shopping malls)… so when were the denominations in $$$s destroyed??? When they defaulted at the individual level? How can the $$$’s disappear until the US Govt and by association also the Fed, Defaults? Doesn’t this equal $$$amount end up on the Fed Balance Sheet? Doesn’t the collateral (houses, factories etc…) attached to the debt instrument maintain its same value on the books? The Fed is assuring that Wealth Destruction CANNOT occur! Which is why Fekete is WRONG. The Assets are all inflated in denomination based on credit inflation, and then they are transferred to the Fed balance sheet. The Fed allows the TBTF to Print, and then the real asset collateral ends up being the property of the US Govt and Banks all the whilst the cost of housing and commerce continually increases. THIS IS WEALTH TRANSFER … NOT, DESTRUCTION OF WEALTH. The deflation is economic activity is arguably a destruction of wealth, but TBTF and the 1% don’t care as it only impacts the 99%, any losses at the top are balanced out by gambling returns in the shadow banking system, they lose nothing whilst everyone else lose their jobs and living standards.
       
      The problem is velocity of money, and this always slows down in the Depression phase. By definition a Depression is a lack of money for the majority of a society, the champagne still flows in the ivory tower. The last depression was preceded by a period of high velocity of money, the ‘roaring 20s’ (Weimar was an inflation followed by the depression). We have already had our roaring 20′s, they were called the Naughties, and the epitome was the creation of MBS and Derivatives and other Cockayne Debt Instruments fueled silly real estate and property increases (Inflation).
       
      An Inflation is not going to happen until the Govt train is derailed for everyone to see as anything left in Paper is spent on too few goods, and at that point so much credit would have been sucked out of the 99% to get sequestered on the balance sheet of the 1% or the Fed that we won’t even really be able to call it an inflation as there will be a complete lack of credit distributed amongst the 99%, just food stamps and Govt issued welfare to those who are deemed useful to the 1% who will have captured the Govt fully at that point in time. It is Fascism. Fascism came during and after the depression in Germany and Europe last time and it will be no different this time. A sure sign was the acceptance by the Germans of Govt Socialism, queue Obama. The next sign was certain companies such as Krupp Steel in Germany (ie, General Electric, Monsanto, TBTF) getting virtual monopolies/exceptions from regulation/tax which puts a small 1% in complete control of the workings of Domestic Industry and all Commerce. It is Right Wing for the 1% and Left Wing for the 99%, and the State MUST be worshiped as a Mother that provides the teat to those who love her, and those who show her no love will not have access to Mothers Teat. “Hail Hitler! For the Homeland!!!”
       
      The Inflation is on the Fed Balance Sheet and in the Stock Market for everyone to see, and as the interest rate rises on Bonds and other forms of debt/credit the cumulative debt that has to be raised through tax and from each family through usury will only exacerbate the decline in velocity of credit/’money’.
       
      At some point the US Dollar will have to substantially devalue against foreign currencies and won’t foreign holders of US bonds love that. The Domestic Economy is shrinking (Evidence: Detroit; say no more), so a devaluation would push up the price of Imports –> CONSUMER INFLATION. This is a global economy like never before and the Fedopoly printing will wash ashore soon enough as soon as trade deals start turning against American and American/Western Multi-Nationals … the terms of trade with the US is being hammered since 2008 and the only thing keeping it strong is simply the inertia of once having been the World lynch pin Currency, this is changing right now and the US owes the most debt to foreigners. Bilateral Currency Swap deals are all the rage right now, and trade organizations like Mercosur are turning Protectionist which is bad for US Multinationals who rely on the unfair trade systems that have been the norm Post WWII.
       
      Domestically the 1% are eating the 99% to death like a cannibal parasite, and the mechanism is the TBTF Banking Sector and the Fed, the US Govt is the Muscle to stand by and protect the parasite, and after the Fascism has taken over there will be many less Americans alive, the median worth of an American will be less than 3rd world status, and a small 1% will own all the land and resources (Water, Gas, Ports, Rail) and anybody deemed useful for slave purposes will get the PRIVILEGE of a little plantation scrip to help their body through the rigors of a days slave labor. Anybody who does not believe this is coming is either very un-informed about human history and human nature, or is suffering from severe Stockholm Syndrome where you love your rapist and believe you can not live without them, in fact you believe your rapist is your soul mate.

  4. @zman – I agree with Fekete that QE has not resulted in PRICE inflation.  However, you seem to have the misunderstanding that inflation is the increase of prices.  This is not inflation.  Increase in prices is a result of inflation.  Inflation by definition is an increase in the money supply.  That is occurring.   Massively.  It cannot be argued.
    Also, what Fekete misses is that hyperinflation is not a result of rampant stag-flation such as a ramped up episode of what the US saw in the 1970′s. 
    Hyperinflation is a currency event- based on the collapse of confidence in the currency.  It is precisely a price deflationary economic situation that ALWAYS precedes hyperinflation.

    -Doc

    • Not to mention that, as many have stated, what can precede hyperinflation is an increase in asset prices due to money printing. Has anyone looked at bond, stock and real estate prices lately. How are those in terms of inflating or deflating, especially compared to real incomes?
       
       

    • Thanks Doc. Inflation is an issue right now. Prices are increasing with the massive increase in money supply. It is well above the FED target of 2%. Probably triple or quadruple of that number. The only thing missing to cause huge runaway inflation and possibly hyperinflation is velocity. The banks ever start to lend all this cash on their balance sheets, its going to make the 1970′s look tame.

  5. “What you can’t explain, why is there no inflation after the biggest global QE program in world history?” , states the ZMAN
    Sunstein/Obombass administration paid troll.

    That’s the bankster-government line you’re
    propagating here, which is the main
    point of you being here- TO PROPAGATE LIES!

    For the real truth on inflation, go here, and ignore the ZMAN troll, who’s here to
    convince us that Shadowstats’ CPI is a conspiracy
    theory on inflation, and that the metals
    have no logical reason to move up in price:

    http://www.shadowstats.com/alternate_data/inflation-charts

    That chart shows that the current CPI inflation
    rate is just below 10%, using the 1980
    formula.

    ZMAN is a Cass Sunstein/Obombass administration paid troll.
    ——————————————————————————————————————————————–
    “Cass Sunstein, the Regulatory Czar, had suggested, in a 2008 paper, that government agents, or allied groups, infiltrate and undermine groups that spread “conspiracy theories.”

    In a 2008 academic paper, President Barack Obama’s appointee to head the Office of Information and Regulatory Affairs advocated “cognitive infiltration” of groups that advocate “conspiracy theories” …….

    Cass Sunstein, a Harvard law professor, co-wrote an academic article entitled “Conspiracy Theories: Causes and Cures,” in which he argued that the government should stealthily infiltrate groups that pose alternative theories on historical events via “chat rooms, online social networks, or even real-space groups and attempt to undermine” those groups. ” 1

    1 http://conservativehideout.com/2010/01/17/czar-wars-trolls-cass-sunstein-advocates-“cognitive-infiltration”-of-groups/
    ——————————————————————————————————————————————————————–

    Another article describing what job ZMAN is paid to do: Obama Information Czar Outlined Plan For Government To Infiltrate Conspiracy Groups: “Put into English, what Sunstein is proposing is government infiltration of groups opposing prevailing policy,” 2

    2 http://www.prisonplanet.com/obama-information-czar-outlined-plan-for-government-to-infiltrate-conspiracy-groups.html

    • Too funny, either way, I would never work for Obama and his crew, the pay sucks!!  Plus, I don’t even care for golf and basketball, which I hear he does most of the day.

    • Come on Mary, are you saying that members can’t watch a video and then discuss what the topic was about?    Did you even watch the video?  What are YOUR opinions of what Fekete discussed?   
      Fekete brings up a very interesting topic, I would think people on this site would cherish the opportunity to discuss the subject with a very open mind. 
      If you want the discussion to be about just things you agree with, then I feel very sorry for you, you have stopped thinking.  Fekete didn’t even discuss gold prices, for all we know,, he’s still very bullish on higher prices in the long term.

    • zman, it has been explained to you here hundreds of times before and you still come back with the same lame ass bullshit every time. I dont know if you are really a paid troll, but you certainly act like one.
       
      And Fekete ultimately believes gold will vanish, as in, go into hiding. No offer at any price (yeah, that high).

    • @zman Fekete lives in a utopic world where Austrian Economics are still possible and the word ‘Wealth’ is denominated in $$$qty, also as if it wasn’t a pure fiat enforced by armed goons who knock your door down if you don’t pay tax or kick you out of your home when you default. He lives in an account ledger somewhere in Austria. It’s a wealth transfer not a wealth destruction. True Wealth is denominated in Acres, and Weight of real commodities, and all of the Real Assets are being accumulated by those who have an unfair ability via the Finance Infrastructure to Add $$$ Credits to their own balance sheets out of thin air.
       
      If wealth is stolen from 99% of people at the value of X dollars and transferred to the other 1% of people at the same value of X dollars then this is not wealth destruction but simply wealth theft, and of course then the 1% transfer their $$$s into real assets so that when the $$$’s become devalued against assets the 1% have all the real ‘wealth’. Unless banks have found a way to destroy Acres of land, and Kilos of Gold then there has been no destruction of wealth just a transfer/theft.
       
      Fekete misses the point as usual and devotes all his attention to pure semantics that distract people from the real issue which is that Wealth cannot be destroyed, simply transferred, and also wealth is in the eye of the beholder … it surely is not denominated in USD’s in the future anyway. Ask an Indian if a Rupee is a store of Wealth and they will laugh at you whilst they stand there drenched in gold chains and watches.

  6. For anyone who prefers not to listen to Max and Stacey carrying on like kindergarten kids bemoaning the contents of their lunch bags, start watching from 12:54 to see the actual interview that is the subject of this post. Sheesh…

  7. The thing that concerns me is not debate over 2 or 10% inflation at the consumer pocketbook.  What does really give me the willies if China says “no mas’ , hits the sell button on the $1.3 trillion in UST notes they hold and dump the other $3 trillion in USD denominated securities.  That might cause a drop in value so large that the dollar’s reserve status could be crippled and make anything paid for in dollars cost how much more?? 25% 35%?  More?
    That’s the problem as I see it and it is too large for me to fully comprehend.  But if something like this happened, the markets would crash, PMs would vault upwards and the cost of petroleum possible go up 50%.  The people will see this, come right out their freaking gourds, rush to the store to buy anything that moves, fill gas tanks until the stations are dry and suck every available penny out of their bank accounts to buy vital supplies before they go up in price by who knows how much.  Those who prepped before will be relatively safe but the 95% of the US population who live deep in the Normalcy Bias will be hit extremely hard.  Consumer confidence and  a currency confidence crisis will be nasty 
    I’ve seen gas lines in the 1970′s, 300% increase in gas prices, grocery store lines for staples while the inflation rate ADMITTED by the government was 8-12%
    It might have been more but that pain caused everyone living paycheck to paycheck see their livestyles go backwards at near light speed.
    I waited 24 months in 12% inflation for an 8% raise Sheesh!
    We now see the Fed admit that inflation is 2% and that is BS.  The 1970s were not an outlier event. This sort of stuff repeats time and time again.
    Mary B knows this everyday. So do the rest of us.  It will get worse and will do so when the veil is pulled back and 20% inflation hits, instead of the 10% we suffer thoough in price inflation and product  sizes getting smaller.
    Like when did 16 ounces become a giant economy size with 14 ounces?  Just sayin’ but that product minification is the hidden side of inflation  Pay the same and get 15% less. 
    Unless you plan to go on the Jenny ‘Habib’  Craig Ethopian diet real soon, stock up on some staples and stack them high.
    No offence to Jenny Craig, my wife worked there.  Ethopian diet?  1 cup of rice a day—walk 5 miles to get it, fight someone to hold it and then walk back

    • “That might cause a drop in value so large that the dollar’s reserve status could be crippled and make anything paid for in dollars cost how much more?? 25% 35%?  More?”
       
      My thought is that China’s dollar denominated assets are large but their selling would not do as much damage as you might think, AG.  What they can do, of course, is be the 1st large economy that is running for the exits.  Seeing that would cause all of the rest to run for those same exits, which would cause a collapse of the UST-bond market and the USD almost immediately thereafter.  As on the battlefield, it can only take a single panic-stricken soldier to turn and run to induce thousands of others to do the exact same thing.  So too is it in the financial markets.
       
      Yes, aside from the USD and UST-bond issues, the loss of world reserve currency status would result in much less demand for USD for trade settlement and that loss of demand would have USD flooding back to the US in HUGE amount.  That would compound the loss of WRC status.  Loss of WRC status alone could mean as much as a 1/3 loss in value for the USD.  Additional losses of purchasing power could occur IF the Fed did not move VERY quickly to remove the excess USD from the American economy.  I have no idea how much impact that would have but it could be substantial.

    • Yes, foreign owned T-Bills are a sequestration of any possible future inflation, but I think the Chinese also realize that the %age return on them is helping to fuel US economic deflation through debt repayment, so they might just be more likely to simply hold onto them. But merely by not buying fresh TBills the Chinese and other countries are already preventing the US Govt from continual expansion … queue the old debt ceiling quarreling again.
       All I see is every country printing more credit/debt and no country moving forward with positive economic activity (real production), which will mean creeping inflation in prices everywhere all over the world if it continues, but it will first happen in Land Prices as usual, and then filter down to everything else as is inevitable.

  8. Fekete defines deflation as the destruction of capital. He also talks about deflation in terms of a collapse in the availability of credit. I have heard other commentators talk about the velocity of money, which slows down or even grinds to a halt in a deflationary environment.
     
    My question is, given the controversy and conflicting points of view, is it possible for deflation and inflation to be occurring at the same time? I think it depends who you are. If you’re a TBTF bank or anyone else on the government’s christmas card list, then clearly the current environment is inflationary. If you are a Cypriot citizen, you’d be feeling deflation right now. No doubt that will come to the western world in due course.
     
    Now what about Weimar Germany post WWI? The government printing presses went into overdrive, and the result (eventually) was hyperinflation. But it didn’t happen immediately, because the German citizens were in self imposed austerity during and shortly after WWI. They were actually saving, which slowed the velocity of money (deflation). So what happened? Why did hyperinflation manifest itself eventually? Answer: because the population lost confidence in their currency, and started offloading it for tangible assets. Germany’s creditors also lost confidence in the currency when Germany used baseless fiat to try to pay off their war debts.

    The threat of repatriation of the trillions of USD denominated cash & bonds held by China and other countries, which is the ultimate vote of no confidence, would no doubt lead to the full manifestation of hyperinflation in the US economy.
     
    In the mean time, what are people in the street experiencing? Price inflation – yes. Deflation? I don’t know – you Americans tell me. Is it getting harder to get loans and credit cards? Is your pay packet getting smaller, or growing along with the CPI? Are salary increases being offered around? Do you have less currency or more, flowing through your wallets & bank accounts?

    One thing’s for sure – if & when hyperinflation arrives, there’ll be no need for further discussion about the semantics of it. From the dumbest to the smartest – everyone will know it.

  9. “Is it getting harder to get loans and credit cards? Is your pay packet getting smaller, or growing along with the CPI? Are salary increases being offered around? Do you have less currency or more, flowing through your wallets & bank accounts?”
    Answers: Yes. Smaller. No. Less. That is inflation.

  10. @Speros
     
    Yes, it is possible for both to be simultaneously occuring.
    Fekete cites Cyprus and Greece as deflationary environments.
    I find this strangely one-eyed, as most of the world, e.g. the developing nations, are up in arms about the Fed’s policies because they are causing inflation at the periphery. The Fed says they don’t give a damn. 60% of dollars are held outside the US.
    (Keiser looks a bit too enamoured and slightly in awe of Fekete.)
    Peter Schiff and Jim Rickards state quite plainly that when the rest of the world dumps the dollar back on the US, then the US will experience crippling inflation.

    The Cyprus template is a bit egregious anyhow, because it was all part of the US’s attack on Russian financial interests; the prelude to their abortive Syrian escapade.
     

  11. The weathly acquire assets. The poor acquire debt.
    There is a constriction in personal and business credit.  I talk to people who are in this industry and they sense and smell something bad.  They don’t know or if they do, won’t speak of it—it scares them too much.  Most bankers are not poor but they have one asset–their day job and that can vanish in a New York Second. There’s been a 6 figure layoff in the lending and finance industry as the banks shed excess overhead.
    As for inflation, the repudiation of the USD, China has currency agreements dozens of countries. Whether they are setting these up for self protection, insurance against our policies or a direct assault against the dollar (see what we did to the UK after WII)may not be known with any degree of accuracy since we, the US, are not invited to the party or even the key summits held in the East.
    In total, these countries comprise about 65% of the world’s population and 35% of the world’s GDP.  If they dump the dollar the word will be sent out, like the Russians told prior to the Cyprus bail-in, to get out of dollars.  If Fidelity Investments can dump tens ofbillions in short fuse US T bills, the Chinese and their allies can dump dollars in the trillions.  There will be buyers called in to try to save the dollar but if we can’t handle and manage our fiscal house, the chances of Yellen and Lew managing something like this will not stop a financial panic. Willnotbeslave outlines this resulting damage quite well in the above post It’s worth printing and keeping as part of your instruction manual on the how-to if the SHTF
    I recall stories about how the US crippled the UK by lending England billions after the end of WWII. England was broke.  Our sub prime hard money loans finished the job of destroying what was left of England after WW I, the Depression and WWII.We loaned England billions and told them the terms. I’d rather borrow from No-nose Joe, head of the knuckle dragging crew.
      We stepped in, assumed the role of world leader, super power and shoved GB off the cliff. The UK as our poodle comes to mind. We jumped in  as the world reserve currency as well. Their economic malaise lasted until the era of Thatcher but the UK is still a faint shell of its former glory.
    Apparently as close as the US and the UK were as allies,  relatives of the Crown, friends and economic partners, kicking the UK into the dustbin was ok. 
    Nothing personal, it’s just business.
     

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