16-Apr-13 World View -- Forced selling hits gold, stocks

[John]

16-Apr-13 World View -- Forced selling hits gold, commodities and stocks


Terrorist attack at finish line of Boston Marathon

** 16-Apr-13 World View -- Forced selling hits gold, commodities and stocks
** http://www.generationaldynamics.com/pg/ ... tm#e130416


Contents:
Terrorist attack at finish line of Boston Marathon
Forced selling hits gold, commodities and stocks
Deflation and hyperinflation
Bad economic data plagues China and United States


Keys:
Generational Dynamics, Boston Marathon,
gold, forced selling, Kevin Grady, China,
Federal Reserve, Bank of Japan, CNBC, Rick Santelli

[Cassandra]

I wonder what will happen if this turns out to be "domestic terrorism" or, in the case of a dead end investigation, it is blamed on domestic agents. Will that lead to a further restriction of American civil liberties? Could the computer chip in the forehead be that far off?

What do you think about silver?

Is there anywhere to go (investment wise) to survive the deflationary spiral?

[gerald]

I wonder what will happen if this turns out to be "domestic terrorism" or, in the case of a dead end investigation, it is blamed on domestic agents. Will that lead to a further restriction of American civil liberties? Could the computer chip in the forehead be that far off?

What do you think about silver?

Is there anywhere to go (investment wise) to survive the deflationary spiral?

Survive? here are three possibilities --

1) own debt free income producing physical assets, -- and hope it is not confiscated, is in a relatively stable social and governmental jurisdiction which can defend itself, and has a purchasing power income stream that moves in tandem with inflation or deflation.
2) go primitive - head to the hills, get away from people and government -- then all you have to deal with is nature -- and she gives no quarter and is indifferent to your survival. ( A small mistake and you could be dead )

and last -- ha ha
3) leave the planet, this may not be such a good idea, even if Paul Krugman thinks selling debt to Mars might be a good idea.

Good luck, if you find an answer let us know.

[vincecate]

What's the motivation for all this talk about hyperinflation? My observation is that it's all wishful thinking.

John, you are a computer programmer, so I am sure that for you to understand my little simulation of hyperinflation will not take much time. I think it would be time well spent to really understand hyperinflation and also to see the cool tool for doing this kind of thing, "Insight Maker". It is web based. My simulation is about 20 nodes, most with simple formulas. Hyperinflation is a real thing that happens over and over again in history. The mechanism is not very complex. I don't think it is wishful thinking.

Background, instructions:
http://howfiatdies.blogspot.com/2013/03 ... ation.html

The simulation:
http://insightmaker.com/insight/4844#

[John]

What's the motivation for all this talk about hyperinflation? My observation is that it's all wishful thinking.

John, you are a computer programmer, so I am sure that for you to understand my little simulation of hyperinflation will not take much time. I think it would be time well spent to really understand hyperinflation and also to see the cool tool for doing this kind of thing, "Insight Maker". It is web based. My simulation is about 20 nodes, most with simple formulas. Hyperinflation is a real thing that happens over and over again in history. The mechanism is not very complex. I don't think it is wishful thinking.

Background, instructions:
http://howfiatdies.blogspot.com/2013/03 ... ation.html

The simulation:
http://insightmaker.com/insight/4844#

So, how come the simulation has been wrong for the last ten years?

[vincecate]

So, how come the simulation has been wrong for the last ten years?

The simulation has only been around for less than a month.

The US has not had the debt over 80% of GNP and deficit over 40% of spending needed for hyperinflation until recently.

My simulation is not yet ready to make any predictions as to the timing of real world hyperinflation. If I could find some really detailed info about several hyperinflations the formulas could be tweeked to fit history and then be predictive as to timing. At the moment it should only be viewed as a tool for understanding the mechanism of hyperinflation. It shows how different feedback loops contribute to non-linear price increases and "out of control inflation". It shows that you don't need any "elites deciding to have hyperinflation" or anything like that.

However, with a world reserve currency in the time of the Internet, the timing is probably going to be different from previous hyperinflations anyway.

Understanding the simulation should not take a lot of time for a computer guy. I really think it is well worth your time to understand it. This deflation vs hyperinflation is one of the biggest issues and worth some effort. If you look at the first 50 days you actually see deflation! As they lower interest rates the velocity of money goes down faster than the quantity of money goes up and you get deflation. So it is a deflation simulator too. So you should like it.

-- Vince

[John]

I've looked at your model and read your fiatdies page. It's clear
that you put a lot of work into this. I looked at some of the
formulas, but it's not intuitively obvious where the numbers in those
formulas are coming from.

I sympathize with what you're trying to do, because I've been trying
to understand the complementary question: How come trillions of
dollars is being poured out by central banks, but it's NOT causing any
serious inflation. So when I asked you why your simulation has been
wrong for the last ten years, it was a serious question that needs to
be understood, because it's the same question that I've been focusing
on.

I approach this question, like most questions, from a generational
point of view. That's why I keep referring back to the 1970s.
In the 1970s, there was little monetary stimulus and huge
inflation. In the 2000s there was massive monetary stimulus,
and no inflation or even deflation. I've tried to analyze
this from the point of view of businesses that were created
during the 1930s Great Depression -- reaching their peak of
hiring in the 1970s, creating wage inflation, versus
being frozen by bureaucracy, unions and regulations in the 2000s,
and laying off more than hiring, creating wage deflation.

As I'm typing this, I see the headline, "Bank of America profit
quadruples to $2.6 billion." Nothing like that is happening to
ordinary businesses. The same kind of thing happened in the 1930s,
but I'll bet nothing like this happened in the 1970s.

So one thing you might wish to consider in your simulation is to
insert some generational concepts, in particular to illuminate the
differences between the 1970s and the 2000s.

[gerald]

John,
You asked a question, why is there so little inflation with so much money printing? Two things may be creating this phenomenon.

1) the amount of cash in circulation ( in existence even if not in circulation just held ) June 2003 -$691 billion, April 2013 - $1,179 billion, a 70% increase in less than ten years. Even though many more (most?) of today's day to day transactions are conducted with credit cards. What/where is all of this cash? http://ycharts.com/indicators/us_curren ... irculation

2)the corporate cash hoard $1.7 trillion http://economix.blogs.nytimes.com/2013/ ... ash-hoard/

Why does it appear that so much money is on the sidelines? Is it because their is a lack of trust in government and laws, which leads to a fear of taking actions? Kind of like when in the 1930's people personally held cash and not in a bank?

OR --

Going Galt? --The phrase "going John Galt" or simply "going Galt" has been used by psychologist Helen Smith[13] and others[14][15] to describe productive members of society cutting back on work in response to the projected increase in U.S. marginal tax rates, increased limits on tax deductions, and the use of tax revenues for causes they regard as immoral. http://en.wikipedia.org/wiki/John_Galt ( side note - having read many comments on various sites regarding business, and government, it is amazing how many times "going Galt" has been implied or said.)

hmmmm

[gerald]

John,
If you have not read "Atlas Shrugged" by Ayn Rand it is worth a read. "Atlas Shrugged" is about a society --1940's US -- where the producers and creators quit -- because of the demands placed upon them by society(government) and where they ( the producers and creators) were ridiculed and penalized and were treated sort of like slaves for the nonproductive and parasites. In her book Ayn describes many of the personalities and political structures we see in society today, and their resultant actions.
Ayn Rand lived in Russia during the communist take over and escaped. --- ( side note,-- working in a self employed business environment and dealing with small business over the years, I have heard many times how they feel they are "persecuted" by government, and "one of these days, one of these days, they will see".

Maybe now is "one of these days"

[gerald]

John,
If you have not read "Atlas Shrugged" by Ayn Rand it is worth a read. "Atlas Shrugged" is about a society --1940's US -- where the producers and creators quit -- because of the demands placed upon them by society(government) and where they ( the producers and creators) were ridiculed and penalized and were treated sort of like slaves for the nonproductive and parasites. In her book Ayn describes many of the personalities and political structures we see in society today, and their resultant actions.
Ayn Rand lived in Russia during the communist take over and escaped. --- ( side note,-- working in a self employed business environment and dealing with small business over the years, I have heard many times how they feel they are "persecuted" by government, and "one of these days, one of these days, they will see".

Maybe now is "one of these days"

"Going Galt" is from Atlas Shrugged http://online.wsj.com/article/SB123146363567166677.html

"The current economic strategy is right out of "Atlas Shrugged": The more incompetent you are in business, the more handouts the politicians will bestow on you. That's the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies -- while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to "calm the markets," another trillion of national wealth is subsequently lost. Yet, as "Atlas" grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate "windfalls."

There are brass plaques on some large single family homes on the far north side of Chicago with the words " Who is John Galt"