Further QE to Bring Hyperinflation Closer As Fed is Out of Short Dated Bonds

Submitted by Deepcaster:

One Reason that the Increasing Inflation is not more obvious to the public is that the Official Statistics are Bogus and not just in the U.S., but in China and other countries as well.  The other is that the Velocity of Money is now extraordinarily low. Higher and increasing Monetary Velocities are associated with higher and increasing Inflation.

Only Operation Twist – in which The Fed sells short-dated Treasury securities and “Sterilizes” those funds by using the same funds to buy long-dated ones – is arguably non-inflationary because the proceeds do not circulate in the economy.  All the other Fed QE and Related Actions are Price Inflationary. But note well that The Fed has nearly run out of short dated securities to sell. Thus ongoing and all further QE will be Price InflationaryIn sum, the Money Printing will continue bringing Hyperinflation even closer. 

 

Those who invest and trade on False Assumptions risk being trapped into losses and Serious Wealth Destruction.

 

Those who are aware that certain commonly accepted Assumptions are False have substantial Profit and Wealth Protection Opportunities.

 

For example, it should be clear to all that acting on certain commonly accepted but often False assumptions – like “Buy and Hold” is the way to make money in stocks – is as a general rule (to which there are only a few exceptions) often a surefire way to lose money.

 

For example, Buying and Holding would have resulted in a loss if one had held the S&P Basket of stocks over the past decade, especially if one takes Real Inflation into account. (See shadowstats.com)

 

Another Assumption which is often but not always True – Don’t Fight The Fed – can be damaging or even Lethal to Profiting or Protecting Wealth in those instances in which it is not true.

 

For example, a Trader who bet The Fed’s announcement of QE3 would boost the Equities Markets would have lost money. As we write, the S&P has dropped 4% since Bernanke announced QE3.

 

Far more significant, consider that if one bet, or invested, on the theory that the various forms of Fed and ECB QE would heal the Real Economy, and reduce unemployment, one would have been quite wrong.

 

In fact, Inflation and Unemployment are Rising and Economic Activity is slowing (per shadowstats.com, see Note 1). But the fact that there is no Recovery in the Real Economy can provide Profit Opportunities. (See, e.g., Note 2)

 

To the extent that corporate earnings and guidance reflect Economic Health, the Third Quarter of 2012 results are telling us that no such recovery has taken place or will take place any time soon. Indeed, multiple QE’s have only increased the debt of the already-unpayable debts of Sovereign Nations. Ultimately, this entails a Lethal Debt Saturation Outcome for the economic health of Greece, Spain, and many others to come.

 

Thus the Investor seeking Profit and Wealth Protection should be looking to short the Equities Market soon.

 

And another Lethal Assumption is that the Fed’s and ECB’s QE & Related Actions are not Inflationary.

 

Money Printing in excess of increases in goods and services production increases is inherently Price Inflationary because when such excess fiat paper is added to the money stock, the Purchasing Power of each unit of fiat currency diminishes. The record high pre-drought prices of essential Grains, Corn, Wheat, and Soybeans, and of Crude Oil, testify to the Inflationary Effect of the repeated and ongoing QE.

 

Indeed, if one looks at the Real numbers, one sees that, for example, the U.S. CPI is already threshold Hyperinflationary at 9.64%. (See Note 1.)

 

And it is no surprise to us that the Continuous Commodities Index has shown an average of 15% annual Commodities price inflation in recent years.

 

And, by the way, where is all the Deleveraging the Powers-that-be want us to perceive?

  • Sovereign Nations are increasing their Indebtedness.
  • Consumer Credit is still Rising.

Deleveraging is generally not occurring.

 

 

And because the Economy is not recovering, the Money Printing will continue and thus so will the move ever closer to Hyperinflation.

 

One Reason that the Increasing Inflation is not more obvious to the public is that the Official Statistics are Bogus and not just in the U.S., but in China and other countries as well. (see Note 1 below for the Real U.S. Numbers).

 

The other is that the Velocity of Money is now extraordinarily low. Higher and increasing Monetary Velocities are associated with higher and increasing Inflation.

 

And note well, that other indications of a supposedly improving economy, such as retail sales, provide no such evidence when Real Inflation is factored in. That is, it is price inflation which makes it appear as if Retail Sales, or sales of houses, reflect an improving economy.

 

For example, consider the recent Case-Shiller Report which indicates House Prices are up 2% year over year.

 

Factor in inflation at 9.6% per year and one sees that Real House Prices are STILL generally declining, as the purchasing power of Major Fiat Currencies is degrading.

 

Degrading Fiat Currency Purchasing Power is a Main Reason Crude Oil is still trading near $90/bbl. And this is thanks to The Fed and ECB’s Q.E.

 

Only Operation Twist – in which The Fed sells short-dated Treasury securities and “Sterilizes” (i.e. renders non-inflationary) those funds by using the same funds to buy long-dated ones – is arguably non-inflationary because the proceeds do not circulate in the economy.

 

All the other Fed QE and Related Actions are Price Inflationary.

 

But note well that The Fed has nearly run out of short dated securities to sell. Thus ongoing and all further QE will be Price Inflationary.

 

In sum, the Money Printing will continue bringing Hyperinflation even closer.

 

We have made several recommendations in recent Letters and Alerts aimed at profiting from this Prospect.

 

Knowledge that certain commonly accepted Assumptions are False, can provide an opportunity for both Profit and Wealth Protection.

 

 

Best regards,

 

Deepcaster

November 1, 2012

 

Note 1: *Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider

 

Bogus Official Numbers          vs.     Real Numbers (per Shadowstats.com)

Annual U.S. Consumer Price Inflation reported October 16, 2012
1.41%     /     9.64%

U.S. Unemployment reported October 5, 2012
8.3%     /     22.8%

U.S. GDP Annual Growth/Decline reported September 27, 2012
2.21%        /     -2.15%

U.S. M3 reported  October 16, 2012 (Month of September, Y.O.Y.)
No Official Report     /     3.32%

 

Note 2: The $US dropped nearly 200 basis points at one point in the last three weeks. No surprise since the Fed’s U.S. Dollar-Destructive Q.E. to Infinity Action, coupled with the ECB’s Similar Action the week before, boosted the Euro vis-à-vis the Dollar, as we earlier Forecast. The very recent $US bounce does not change its weakening Trend.

This Debauchery of the $US weakens its Purchasing Power and thus increases Burdens on the agonized disappearing Middle Class.

The Bernanke claim that buying $40 billion per month in Mortgage Backed Securities would Stimulate the Economy and help the Housing Market is just a Fictitious Cover Story. In fact, it is just another Gift to the Mega-Banks who hold Underwater Paper, and to Wall Street which proceeded to rally on The Fed-sugared High.

Both the Continuous Commodities Index which show Average Annual Price Inflation of 15% and the Real Inflation Number (9.3% per year from shadowstats.com) reveal Serious Inflation is with us and it Intensifying.

And Especially Food Price Inflation.

To increase Yields, Farmers increasingly employ Fertilizer.

And a recent Reco – a Fertilizer Producer – was trading near its 52 week low at under 40¢ per share when we first recommended it. It has moved up nicely since we recommended you buy in. But it has such great potential that we raise our original “buy under” price to 45¢ per share.

To see our recent Buy Reco aimed at Profiting from the Fed’s Inflation Rocket, read Deepcaster’s recent Alert, “Buy Reco (under 40¢/share) to Ride Inflation Rocket; Forecasts: U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, & Interest Rates, Gold, Silver, Crude Oil, & Equities,” recently posted in ‘Alerts Cache’, on deepcaster.com.

Comments

  1. January will be promising for precious metals because like the author says

    1. Twist will end because of the dry supply of short dated bonds to sell, and thus no more ”unsterilized” bond purchasing.

    2. BIS should announce gold as a TIER 1 asset, as well as the requirement that central banks have 6% rather than the current 4% of TIER 1 assets in reserve.

    Here is an interesting occurance in India. Seems their new silver futures contract is easily deliverable, with most traders taking delivery. http://economictimes.indiatimes.com/markets/commodities/mcxs-silver-1000-contract-witnesses-record-delivery-of-1010-kg/articleshow/17088063.cms       

    • Interesting! It looks like everyone is starting to wake up about the truth and they are starting to understand the meaning of “If you don’t hold it, you don’t own it”. The bond purchasing would allow the Federal Reserve to create more dollars which will create more inflation.

  2. The Fed’s plan is on track. Hyperinflation is what they want to solve the debt problem. Of course, the cure is worse than the disease. If only TGB’s (those greedy bankers) would let go of that ZIR currency and get the velocity going. Having fun with TLA’s this morning.

  3. I Know What’s Going To Happen He Can’t Hide It Now. Lol
     

  4. India’s silver contracts will be deliverable until there is no silver to deliver.  Then we’ll see how the Indians handle that problem. It explains why India wants at least 130 MOZ of silver this year.
    Wold someone put a bullseye on Mental Ben’s mug.  I need to zero a new scope.  thanks

  5. I don’t believe in hyperinflation now. Well, not in the short term. I believe Martin Armstrong is right : hyperinflation is near to impossible in the core economy. Also, Dent’s arguments are not bad either : hyperinflation happens when demographics are strong with lot of young people buying things fast, etc. Today, we have the opposite : old folks are clearing debts and living with less and less. And those are NOT inflationary. Moreover, each time a debt is cleared, money has been destroyed, so even if the Fed creates 10 trillion from thin air, if 11 trillion disappears, we are in a deflation.
    That said, this is not a normal deflation and cash will NOT be king. Gold and silver must be bought as a protection against government. Gold and silver are real cash. And government can’t tax those easily.
    We are at Peak Oil, don’t forget that. Less and less and less energy. This is not hyperinflationary. This is über-deflationary. And PMs should be kept as a protection, as a stock of REAL money, instead of a hedge against an hyperinflation that will probably not come.

    • In the Weimar Republic a potato was worth the same in Real Currency Valuation at the beginning of the hyperinflation as the end of hyperinflation.  It could easily be stated that a potato did not experience hyperinflation but just maintained value to the falling currency.   This is what happens to core industries during an event such as the Weimar Republic.  Many would state the potato went through hyperinflation but really it didn’t, it just got adjusted for the currency devaluation and food is always a core product of every countries industry.  The potato probably went from 1 Mark to 50,000 Marks.
       
       

    • Not many old folks are clearing debt that I know. They are all suffering inflation and wondering how they are going to eat next month.

    • It’s hard to believe that hyperinflation will happen right now with the US dollar. I think the first signs to notice during the dollar’s devaluation is when the new 500$ bill is released in circulation and when all coins are gone from circulation. Gold and silver are the true money since they’ve kept their values for about 5000 years!

  6. Currency printing, not money printing. Money cannot be printed. 

    • That’s true!
      “Money should be created in a natural way, not by fiat, not by government’s declaration.”
      - Ron Paul
       




  7. Paper claims ECB breaking rules with Spanish loans

    AP) – 23 minutes ago 

    BERLIN (AP) — A German newspaper claims the European Central Bank is lending Spanish banks billions of euros under conditions more generous than its rules allow.
    Weekly Welt am Sonntag reported Sunday that the ECB is accepting Spanish government bonds as top-tier collateral in return for €16.6 billion ($21.33 billion) in loans to Spanish banks. The banks are straining under the weight of bad debt from the 2008 collapse of Spain’s real estate sector.
    The paper, which bases its claims on publicly available documents, says the ECB’s own rules mean most of the government bonds should be considered lower-level collateral or not accepted at all.
    Major international ratings agencies accord Spanish government bonds only second-tier credit-worthiness.
    Officials at the Frankfurt-based bank didn’t immediately respond to phone calls and emails requesting comment.

  8. Here’s the plan   427′s sweet cowgirl lures Bernanke out his lair/liar.  We bag him and take him to the range.
     Start thinking Bruce Willis in  The Jackal.  Like Jack Black, we hand Ben his own target and tell him “RUN”  
    Sweet cowgirl can reload my brass anytime.  I’ll buy the beer. 
    Ah, Sunday morning fantasies. 
    How do I enlarge the image of the Liar in Chief  jefe M45?

  9. perfect  M45  I can use that at 100 or 200 yards with a little scope help.  Thank you

  10. Chrissy   I met someone with a Swiss balt action last year at the Frontsite 4 day rifle course.  He could shoot like the dickens with his rifle. I don’t know the caliber but it was a heavy round.
    My old eyes are good for 200 yards with iron sights and 400 yards with an Eotech and 3x scope.  But that’s with the. 223 mouse round.  I’m half tempted to put a scope on my Mauser k98K but its an old school model and I don’t want to spoil it.  It’s a collector rifle but the 8mm is one heck of a round.  It supposed to punch out to 600 yards.  I’m not good enough to test it at that range so it lives in the safe. When I’m up to it I want to try the Ben B target M45 was so kind to make for me. That’s good for 400 yards. We’ll see.

    • I use to have a German 7.92 Mauser with an original bayonet still packed in grease. My Cousin and I would buy Inter Arms ammo, dissolve out the primer with lacquer thinner and reload with same bullet and fresh powder and primer. A well made rifle like most everything Germans make. You can’t beat German steel. I hated the British 303 rifle. It was not that accurate and the surplus shells used Berdan primers, which could not, or were hard to reload. The Japanese military rifles were crappier than that. Of course, the US M1 Garand .30 was a fine rifle, much more reliable and made a bigger hole than the junk Colt made and called a M16. Not good having an automatic weapon that constantly jams (failure to extract).

  11. The real numbers are more logic than the official numbers because we can see the prices of goods and services rising faster than the official inflation rate by ourselves and QE infinity is announced so hyperinflation will sure arrive soon.

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