Carl L wrote:I know that John believes that inflation is impossible. I think that Faber is correct about 666 being the nominal S & P low. There is every reason to believe that we are entering an inflationary depression. Bernanke and the rest of the world's central banks will print however much money is necessary to avoid deflation. When the mass of people (the core principle of generational dynamics) catch on to the fact that all currencies are losing purchasing power, there will be a surge to buy as much as possible while the currency can still be traded for objects that are valued. With the stability of money having been eviscerated, it will be impossible to organize production and distribution on the scale needed for the world economy to function.
I have followed this website since its inception. John's analyses are always thought provoking. The high level of discussion on this GD Forum is an additional service.
Carl Lieberman
This really made me think. It seems like a point
of no return has been reached. To where I'm not sure.
Starting with Faber, he also said he thinks the stock market can go down 20% starting about now. That was on Bloomberg too. If that were to happen, those
of us on this forum might conclude that deflation has begun. That could be the wrong conclusion. Instead, it may be possible that stocks will retreat because monetary conditions have become so unstable that
instability is winning out over inflation. In other words, all the liquidity that was pumped in since March was more important initially than the
instability it generated, but the forces
of instability are continuing to grow as effects
of the liquidity wear off. Even though an inflationary backdrop may remain, the overall mix from about this point forward is not good for business or the stock market (just last week it was reported that monetary
instability in South America is negatively impacting the bottom lines
of US multinationals).
But I still tend to favor the deflation argument. Part
of the reason goes back to something that was discussed here a few months back and that was the question
of whether the Fed could act quickly enough to stop the deflation, since there is always a time delay between the bursting
of the bubble and any Fed actions to counteract it. At that time, most here argued that the Fed could not act quickly enough. At some point, it seems probable that another and this time much more rapid bursting will occur and the Fed will not be able to act quickly enough to stop it. One thing that makes me believe this will happen is that nobody thinks it can (complacency). That includes all the learned panelists on the recent Barron's Roundtable and just about everybody else. At this point, I'm almost convinced it can't happen either. Anything that is out
of the Fed's control could trigger that - a rogue nuke, pandemic outbreak, severe earthquake, or maybe more likely an old fashioned bond interest rate spike due to default fears, etc. My tendency still is to think that anything
of that nature would cause deflationary panic and leave the Fed sitting on their hands with no solution. What if the Haiti earthquake had happened on the New Madrid or San Andreas fault lines? Curious if anyone else has thought
of this.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.