Wednesday, November 3, 2010

On A Clear Day You Can See Inflation

Food Sellers Grit Teeth, Raise Prices

That's the headline from a Wall Street Journal article posted online tonight that you can read HERE Funny how the deflationistas conveniently overlook the issue of rapidly rising food prices when they spew out their reckless views.  They also ignore the following (click on the charts to enlarge):

Sugar up 114% since June

Corn up 79% since June

Wheat up 54% since June

A perusal of several other neccesitous consumption items like oil and healthcare insurance will reveal similar stories.  And with the significantly weaker dollar, get used to paying more for your basket of general imported goods at Walmart going forward.

Aside from the price behavior of gold and silver, there are plenty of other overt indicators which reflect a growing market perception of higher inflation ahead.  Today, for instance, the long bond experienced a 3-point price reversal to the downside from this morning after the QE announcement.  The yield on the long bond shot up to 4.07%. It was around 3.90% just a couple of days ago and was approaching 3.5% a few months ago.  The long end of the yield curve typically reflects market expectations of both sovereign U.S. credit risk and inflation risk.  Since it is now apparent to all that the Fed is willing to print enough money to prevent a U.S. Govt bond default, we have to assume that the higher yields on the long end of the Treasury curve are starting to reflect inflation expectations.

The other rediculous deflationista argument is based on the absurd idea that there is some sort of debt contraction going on in the U.S. financial system.  That is just plain wrong.  For sure the level of private debt has declined somewhat.  However this debt has been "shifted" from the private sector balance sheets to the Fed and the Taxpayer. In fact, the overall gross level of debt in our system is rapidly expanding.  As of the end of this month, the Fed will supplant China as the largest holder of U.S. Treasury debt.  In addition, the outstanding Treasury debt is increasing at nearly a geometric rate.  In fact, by the last estimate I saw, the U.S. Treasury debt will exceed $14 trillion by March.  By then the amount of outstanding Federal Debt explicitly reported (there is at least another $7-10 trillion "off balance sheet") will have increased 55% in the first 26 months of Obama's Presidency:

(click on chart to enlarge)

It's going to start to get ugly.  Please read this quick interview of Jim Sinclair posted today by King World News, which explains why gold/silver is the only way you can protect yourself from what is unfolding in this country: 
We are in unchartered waters with business folding over.  We don’t know what the name will be for this.  One thing we do know is it’s not dollar positive and that the only insurance out there that would react positively to things we can’t control such as Fed decisions is gold
Here's the link: Got Gold? The next time you run across some cybergarbage analysis of why we are entering into a deflationary death spiral, you only have yourself to blame if you decide to waste brain cells reading it...


  1. My final advice to Denniger and the rest of the deflationists is to take whatever money you have left and buy a better quality tent and sleeping bag

  2. I've been reading about the deflationary death spiral now for at least two years.

    Where the hell is it?

    Can you really say that housing is in a deflationary spiral?
    It's more like it was way overpriced with fraudulent money.

    I don't live in a bubble zone, therefore if the value of my house has indeed declined (and that is debatable), it's because of the unemployment situation in my area.

    When I think about it, and trust me I have thought about it, I can't think of a thing that has declined in the world I'm living in.

    My wife's and I's wages > up

    HVAC parts > up

    Groceries > up

    Gasoline > up, sure it might be down a little from where it was, but not too long ago I was paying .99 cents a gallon!

    My brother is restoring an engine in his musclecar, do you think the price to rebuild this engine (machine shop labor, parts) is cheaper than it was say 5 years ago? 2 years ago?
    Yeah right.

    I've really tried to come around to the deflationista's way of thinking (I'm debt free with a little money put back, so I desperately wanted to believe in that) but I just can't.

    It's BS, plain and simple.
    Just a matter of common sense really.

    It's inflate or die.

  3. dumbfounded by sdrg!

  4. patience. they had their board of directors meeting today. i believe they will soon file for conditional TSX listing.

    if they can list on the TSX, it will mean that a lot of Canadian fund money that can't touch it right now can buy it.

  5. I have been lol'ing for a long time now as far as the deflation call. And Dave my Dollar call was WAY off...Glad I was just speculating ....My money is shinny :)

  6. DAAAVE!

    Where are you????
    We miss you at the partiiiey!
    Nah, now you are vindicated and the shills deflas called in short will try to pick their BS at its clean end before swallowing it themselves!!!
    Cheers and let's have the party going on until we have scorched earth behind!

  7. I see Mish is starting to change his tone.

  8. Well what a suprise.

    From Eric King's blog KWN

    Another extremely high-level source today out of the United States has confirmed that Goldman Sachs made a fortune in the last gold bull market. The source stated, “Without a doubt that the most money was made over the shortest period of time in late 1978 to first quarter of 1980 by the international investment bankers, particularly Goldman Sachs and Salomon Brothers. Keep in mind, Goldman made money long entering the gold market with perfect timing, and then reversed their gold positions as gold was peaking and made money on the downside as well.”

    Well there you have it, Goldman Sachs is extremely long both gold & silver and laughing all the way to their own bank. You can bet Goldman along with other players will be enjoying this short squeeze in gold and silver.