The Presidential Election Won’t Stop the MOTHER OF ALL DEFLATIONS

Unfortunately, it doesn’t really matter which party wins the presidential election as neither one will be unable to stop the coming MOTHER OF ALL DEFLATIONS.  While it is frustrating to watch just how insane this presidential race has disintegrated into, I try to not to focus on it.

Why?  Because the U.S. Government will become totally powerless to deal with the future financial and economic collapse.  Furthermore, most institutions will also lose the ability to function when the system cracks.   This really isn’t a matter of if or when…. IT’S HAPPENING NOW.

According to a recent Zerohedge article, Dallas “Pension Fund Panic” As Major Warns Of 130% Property Tax Hike To Avoid Collapse,

“This is much like a Bernie Madoff scheme, if you ask me,” said Dallas mayor Miek Rawling discussing the collapse of the local Dallas Police and Fire Pension Fund. The Dallas pension board wants the city to contribute $1.1. billion in 2018, but to do that, they would have to increase the property tax rate by 130%.

This is just one sign of many hundreds that continue to eat away at the financial and economic system.  What is ironic to witness is the complete failure of the analyst community to understand the real reason for these financial disasters.  While most of the blame is put on the totally useless Mainstream Financial Networks, the majority of the alternative media analysts are clueless as well.

This is due to the alternative media’s failure to understand the underlying energy dynamics.  I used to read a lot of the alternative media sites (especially the precious metals), but presently only look over a few.  Many of the precious metals sites continue to harp on matters that really aren’t important anymore.

Of course, they do this because they do not want to look at the vital energy dynamics.  For some reason, most of the precious metals analysts look at energy as just another industry…. much like the retail or health care industries.  It doesn’t matter to them that the price of oil is now $75 below the cost of new production of $125 a barrel (according to the Hills Group work).

The falling oil price is totally gutting the U.S. and Global Oil Industry.  I wrote about this in my article, The End Of The U.S. Major Oil Industry Era: Big Trouble At ExxonMobil.  Without transports fuels, the world’s economy disintegrates…. and disintegrate it will.

Thus, the collapsing oil price will destroy the value of most physical and paper assets, BUT NOT GOLD & SILVER.  Here is a chart of the “Global Asset Universe” by the Savills Research Group Report:

global-asset-universe-2015new

As we can see, they estimate that the total Global Real Estate Market is valued at $217 trillion, Securitized Debt (Treasuries & Bonds) at $94 trillion and Equities (Stocks) at $55 trillion.  In their report, they stated that all the gold mined in the world was valued at $6 trillion.  I revised that figure to only include “physical investment gold and silver” which is estimated to be $3.1 trillion.  You can check how I estimated the $3.1 trillion of gold and silver in my article, How High Will Silver’s Value Increase Compared To Gold During The Next Financial Crisis?

The Savills Group breaks down the Global Real Estate market into “investable” and ‘non-investable.”  According to their estimates, they list that of the total $217 trillion in global real estate, only $81 trillion are investable, while the remainder is held privately.

global-assets-savills-group-table

The value of global real estate, stocks and bonds are totally inflated based on a much higher oil price of $110-$125.  Now with the price of oil at $45, the value of these assets should have collapsed a few years ago.  If we consider the price of oil was $110 in 2012 and now is $45, that represents a collapse of nearly 60%.

Unfortunately, many people do not understand that the value of real estate, stocks and bonds are based on the value of energy.  Instead, they blindly believe the value of these assets are based on “SUPPLY & DEMAND” or some other VOO-DOO Economics.

If we look at Louis Arnoux’s chart showing the U.S. GDP value per American in gold and oil units, it collapsed back in 2012.  Again, the U.S. GDP and value of most paper assets should have collapsed along with gold and oil, but they didn’t:

slide-4

The chart shows how U.S. GDP per American (Green) continues higher even though gold per head (Blue) and oil per head (Red) collapsed in 2012.

Thus, we have the Greatest Real Estate and Financial Bubble in history looking for a pin…… and the pin is the falling price and production of oil.  I will explain this in more detail in upcoming articles, however if we assume a 75% collapse in the value of real estate, bonds and stocks, this would be the result:

global-asset-universe-after-deflation

Global Real Estate values would fall to $54 trillion, Securitized Debt would drop to $23 trillion and equity values would fall to $14 trillion.  Thus, the total value of these assets would collapse by $274 trillion to $91 trillion.  However, the value of physical gold and silver would surge to ten times its value to $31 trillion.

Of course, this is just an estimate, but if we consider the value of real estate, stocks and bonds falling 75%, only 10% of that $274 trillion lost is $27 trillion.  Which means, just 10% of the value of these assets moving into gold and silver would push their value up to $31 trillion.

Again, this is just an estimate, but investors have no idea just how quickly the value of global real estate, bonds and stocks will fall in the future.  I put a figure of a 75% collapse, but that is just in the beginning to middle stages.  I would imagine, by the time the global crash is complete, these values could literally fall by 90-95%.

The current Presidential Election is a complete farce.  Even though I try to stay away from politics, it becomes extremely frustrating to see the public totally brainwashed by Mainstream media propaganda.

People need to start distancing themselves from anything that is run by a centralized system, whether that be government, finance or the economy.  It is time to look to more local and regional solutions as the viability of centralized systems collapse over the next 5-10 years.

Check back for new articles and updates at the SRSrocco Report.  You can also follow us at Twitter, Facebook and Youtube below:

Enter your email address to receive updates each time we publish new content.

I hope that you find SRSroccoReport.com useful. Please, consider contributing to help the site remain public. All donations are processed 100% securely by PayPal. Thank you, Steve

62 Comments on "The Presidential Election Won’t Stop the MOTHER OF ALL DEFLATIONS"

  1. According to Jim Rickards when the IMF bails out the central banks with SDR’s after a financial collapse,the issuing of these SDR’s will put liquidity back into the global financial system. this he says may be highly inflationary, how can this work with a thermodynamic decline of the energy market. How will this new financial system with (SDR’s) as the new world reserve currency affect the pricing or the cost of production of oil

    • Peet

      I am pretty clueless when on this subject BUT I do have a basic understanding of what SDR’s are all about and I have a basic understanding of where Steve is coming from. This is what got me interested in Steve’s site in the first place. I have a lot of time for Jim Rickards, I think he is one of the smartest guys in the room BUT he is a BANKER and he thinks like a banker. His theories are complex. The one thing he does get right however is his support for PM’s.

      Trying to understand some of this stuff can screw with your brains BUT persistence is part of the game. They talk about “Constructive Thinking”, “Complex Theory” or “Complexity Theory”, “BS Theory” and “Whatever Theory” BUT what they don’t talk about is “OBJECTIVENESS”, which is FACT!! And that is what you get on Steve’s site.

      I used to often get into arguments (Discussions!!) with my accountant; I would say; “Can’t you reduce my tax a bit more”? He would always put a piece of paper in front of me and say; “This is what your earned and this is what you paid out”; what more do you want me to do? That to me is “OBJECTIVITY” … Lol

      Most everything people talk about today is either misinformation or just plain bullshit!!!

      I am not pissing in Steve’s pocket (I think he is up the creek with some-things e.g. Steve thinks the price of oil is going down, I think it is going up into the end of next year to around $80.00) BUT he is on the money with the energy thing and it is more a finite resource today than it was 25 years ago especially now those in the east is wanting the lifestyle we have had for many decades. And who can blame them. As long as they can achieve that without war I will live with it.

      Conclusion: (Yes I know this is a bit long winded)

      I think the BANKERS will try everything and anything, so you might well see a further introduction of SDR’s as we go down this path of destruction BUT they will be short lived because they are useless without oil.

      Now the middle of the earth might be full of oil BUT if I am going to use two (2) barrels of oil on the earths’ surface to get one out of the middle then it just ain’t gonna work!!!! We are stuffed period.

      AND THAT IS WHAT I CALL OBJECTIVITY!!!!!!

    • @ Peet , Jim Rickards is a unbelievable crook and I could not believe what he was proposing to solve the us debth situation. Such a clever man but an ex cia/long term management capital
      so truly deep state and stealing is their last resort. Shame on Jim he lost all his credibility .

      watch from 11 min

      https://youtu.be/pEtdB6z6jjM

      • I’m speechless. Does anyone know when Rickards uttered the words of stealing foreign gold? I think this on itself would be as much as a declaration of (world) war… Disgusting. Thanks for sharing Pieter.

        • vlad the impaler | November 10, 2016 at 9:00 am |

          The comments of all those PMs peddlers should be corroborated by their own investments in PMs. If the prices of PMs are to explode why donn’t PMs dealers stash all supllies?

      • The link has been removed. Apparently, someone doesn’t like the light shined on them.

  2. Flying Dutchman | November 7, 2016 at 2:44 pm |

    Hello Steve,

    I like your analyses and I know you are very sharp on the subject energy.

    My question is little off topic but can you tell me what you think about lithium and the future of this element?

    Greetings,

    Flying DutchMan

    • Flying Dutchman

      I think LITHIUM as a store of energy for my home is a possibility in the next few years. I would invest in it on that basis alone BUT not with Elon Musk. I think he is a snake oil salesman.

      Did you know Afghanistan is the Saudi Arabia of Lithium !!! FUNNY THAT?

    • Flying Dutchman,

      Lithium will have a future for a while because it provides a higher quality battery. However, falling energy production will limit the future amount of its production and use.

      steve

  3. “Thus, the collapsing oil price will destroy the value of most physical and paper assets, BUT NOT GOLD & SILVER.”

    oh yes, g/s too. g/s can’t buy what isn’t available for purchase.

    • gman,

      That’s where you are incorrect. No need to debate here or play TIT for TAT. Just wait around a while and you’ll see first hand. Right now, a 1 oz silver coin buys 9 months worth of food off a farmer in Venezuela and 1 oz gold coin buys a modest home. Funny how that works.

      steve

      • “Right now, a 1 oz silver coin buys 9 months worth of food off a farmer in Venezuela and 1 oz gold coin buys a modest home.”

        like to see a reference for that, please.

        • ah, I see the reference. “From one of Tom Cloud’s sources who was in Venezuela recently”

          really? “he said that he said that he saw”?

    • Slithereen Guard | November 7, 2016 at 8:56 pm |

      overall wealth will be destroyed. but wealth from bonds, stocks and real estate will run to precious metals. so the gold price will rise.

      still overall it is wealth destruction.

      • “still overall it is wealth destruction.”

        more specifically it is wealth creation shutdown. as fiat debt money fails the world economic system, dependent on electronic fiat debt money, will fail with it. so yeah, you’ll have an ammo can or ten of g/s, but there won’t be much to buy.

    • Slithereen Guard | November 7, 2016 at 8:58 pm |

      actually wealth to rush to precious metals, crypto currency and also in fiat currency.

      • We’re seeing the rush into crypto and fiat NOW. Those are the last currency / currency-esque bubbles to break before the rush into real money.

  4. Robert Happek | November 7, 2016 at 4:40 pm |

    Steve, you are making frightening predictions. If I understand you correctly, you predict that conventional paper assets (including real estate) will deflate by 75% in the long run while precious metals will rise tenfold from present levels. But you did not say anything about the measuring stick, the US Dollar. Is the purchasing power of the US Dollar to stay the same or even increase in the future ? In other words, will people continue to be able to buy bread for $2 per loaf and a gallon of gasoline for $2 per gallon ? If that is the case, then you predict that the purchasing power of precious metals will increase tenfold. However, it is also possible that the purchasing power of precious metals stays constant, but the nominal price rise of gold simply reflects a hyperinflation of the Dollar. So the price of bread and gasoline will rise tenfold and the purchasing power of precious metals in terms of food and fuel will stay constant while nominal prices for these good will rise tenfold.

    The Hill group predicts a long term decline of the price of oil. I understand the logic of that argument: Since the energy cost of pumping oil is rising indefinitely, it will come a point in time where it makes no sense to pump the remaining oil out of the ground. That means that the oil in the ground has no value, and therefore the value of the oil company owning that oil field must decline as well. However, there is a difference between oil in the ground and oil above the ground. Any oil above ground must have at least the value of the energy contained in it. So we could be in the paradoxical situation that oil above ground has high value while oil in the ground has no value. So if the Hill group is correct, then the oil at the gas pump will rise relentlessly, while oil companies and their oil in the ground will have no value. Right now the price of oil above ground is low because production of oil still exceeds consumption.

    One last remark: If the prediction is that the purchasing power of paper Dollars does not decrease, then one diversification strategy would be to load up heavily on paper Dollars as well, not only on precious metals.

    • Robert Happek,

      You bring up some excellent points. My estimate of a 10X movement in gold and silver is more of a guideline as the value of most other assets implode. This goes above and beyond the destruction of fiat currencies, such as the Dollar. It is hard to forecast how things will unfold, but deflation seems the ultimate outcome due to the collapsing value of energy.

      If we do get hyperinflation similar to the Venezuela Bolivar, then yes, prices of energy and commodities will skyrocket for a while. From one of Tom Cloud’s sources who was in Venezuela recently, a 1 oz silver coin buys 9 months worth of food from a farmer in the country and a 1 oz gold coin can buy a modest home.

      This may be the ultimate outcome in the States. The reason physical gold and silver will rise considerably even as the price of energy falls is due to the misallocation of a massive amount of wealth in CAPITAL SINKS instead of real LIQUID STORES OF VALUE.

      Once the price of oil heads below $30 and production really falls, there are going to be a huge glut of supposed assets with no BID at all.

      steve

      • Is Tom correct? Look at real estate prices online and you can see that a home in Venezuela costs between 250 and 350 thousand USD. And can go over a million USD for something up market.
        I think Tom might be pulling your leg.

        • Barry,

          It’s not Tom, its a client of his. And no, he is not pulling my leg. It is modest home for a person in the country, not in the big city. The same with the 9 months worth of food, from a farmer in the country.

          Do you actually believe Venezuelans can afford the same median home price as Americans in the states????

          steve

        • http://www.zerohedge.com/news/2016-08-04/srsrocco-precious-metals-webinar-big-events-coming-1-oz-silver-buys-6-months-food-ve

          This article is a few months old, so by now one ounce of silver buys you 9 months of food. Time flies when you’re having fun.

        • “Is Tom correct?”

          doesn’t sound reasonable. $18 for nine months of food is really pushing it even if the farmer is looking to unload a field of crops before it rots, and “modest” in campesino terms probably means tin-roof shack.

          • Would a “modest home” that is a tin-roof shack include some significant grounds?

            This kind of house in the USA would not add more than a few hundred dollars to the ground price. Land value does go up and down, and you can’t pack it up and take it anywhere else. If a Ven. Man working hard made $3/day vs. American making $150/day, and a shack is 400 days wages (1 oz gold) to own, the Ven worker might be ahead of the American worker trying to get a place to live. The American might pay 65% of his wages as rent to live in SF or pdx.

          • “Would a “modest home” that is a tin-roof shack include some significant grounds?”

            if it did then one wouldn’t talk about the shack, one would talk about the land. but the third-hand-another-continent rumor on display here says “modest home”.

    • the primary presumption behind the predictions, and thus your questions, is that as the dollar fails the markets and supply systems somehow will continue to function. they will not. a secondary presumption behind the predictions, and thus your questions, is that g/s somehow “store” something (sometimes vaguely described as “economic energy”). but they store nothing.

  5. Steve,

    If you are assuming a 75% drop, after the initial collapse and the destruction of credit markets, what is to stop the system from a total collapse, where all paper asset values drop to zero? Once the liquidity leaves the market, even with the FED dropping helicopter currency, fiats will be dead and you will see massive hyperinflation. If you want or need something you better have what the holder wants or needs or you will go without – this is when PMs will come into there own.

    I suppose the alternative is a stair step down, more gradual collapse with the FED throwing everything they can at each step until the market finally gives up. It is then that all paper asset values go to zero. Even with helicopter currency, fiat is finally dead and we are back to barter and PMs. I see this path as much more problematic for survival. It gives the government enough time to declare and enforce marshal law, preventing many from bugging out while the world around them goes beserk.

    Under your assumptions, when paper assets have lost 90-95% of their value where will gold and silver go?

    I still think it would be informative if we could see the graph of Debt per US Head overlayed on the Chaotic Thermodynamic Decline chart.

    Thanks,

    SteveW

    • SteveW,

      You also bring up some excellent points. Again, it is hard to predict how things unfold going forward. That being said, major deflation of fiat currency pricing will be the first stage. After that, it makes perfect sense that Dollars become worthless, thus causing massive hyperinflation.

      steve

      • DisappearingCulture | November 8, 2016 at 8:15 am |

        75% drop in the price of stocks, bonds, and average real estate [modest homes in non-urban areas dropping less as people have to live somewhere]…believeable to me.

        Not mentioned in article above is the costs of everyday necessities. I can’t see quality food dropping that much [junk food more] or quality shoes [status/designer shoes more], same with clothing. I wouldn’t expect essential quality items to cost a lot less during deflation.

        • Dow 6666 and S&P 666 and I might be nibbling a bit (depending on what the metals do…)

        • DisaapearingCulture,

          The DEFLATION will take place in things we OWN Stocks, Bonds & Real Estate), and INFLATION will take place in things we consume. However, that will depend upon certain factors.

          steve

          • DisappearingCulture | November 8, 2016 at 11:25 am |

            Good distinction Steve.

          • “The DEFLATION will take place in things we OWN Stocks, Bonds & Real Estate), and INFLATION will take place in things we consume.”

            exactly. wealth transfer.

            been saying that for years, and I wasn’t the first.

    • “Under your assumptions, when paper assets have lost 90-95% of their value where will gold and silver go?”

      underground. you’re forgetting asset confiscations and tax increases.

      in europe after wwii the most commonly traded items were tobacco, chocolate, alcohol, and coffee. selco reports that after a few months of seize in kosovo people eventually lost their interest in gold but never lost interest in toilet paper, and he reports the most commonly traded items were matches, pocket knives, duct tape, and plastic sheeting. and that’s your clue for the day.

      • gman,

        Thank you for your pearls of wisdom. I shall await others with bated breath.

        What should I say to you? Should I not say
        ‘Hath a dog money? is it possible
        A cur can lend three thousand ducats?’ Or
        Shall I bend low and in a bondman’s key,
        With bated breath and whispering humbleness, Say this;
        ‘Fair sir, you spit on me on Wednesday last;
        You spurn’d me such a day; another time
        You call’d me dog; and for these courtesies
        I’ll lend you thus much moneys’?

        • “is it possible A cur can lend three thousand ducats?”

          heh. no-one is going to borrow any money from you. there will be nothing for them or you to infest in.

    • SteveW, when trust in cb’s dissapears, they will switch to sdr backing. The sdr partially backed by gold, and currencies backed by the sdr. In that way they can leverage physical gold twice, and we won’t get $150.000 gold because that’s not workable in a trillions FRN world economy. $15.000 is reasonable though. My 2 cents.

      They blew everything sky high with their future debt promises and when they let it go it will be Mad Max by tomorrow. Of course this is just delaying the inevitable by maybe another 2/3 years.

      • houtskool,

        I was my understanding that they removed the gold backing from the sdr in the 70’s with the collapse of Bretton Woods and that is now just a basket of the major fiats.

        I have read about a number of “plans” to save the world markets, foremost being the Manhattan plan that would back a new US currency with US gold but that gold would have to get to over $10,000/oz.

        For anything to save the current situation, they would have to do extensive preparations for it in the very, very near future before the credit crises’s crippling effects and the collapse of the energy delivery systems.

        They, HRC & the French, killed Kaddafi because he was attempting an African gold backed currency so I doubt there will be any unidentified escape routes.

        Your guess of 2/3 years is as good as any. The longer it goes, the better prepared we can be.

  6. Thanks steve. The medievil period best describes a low energy future on a number of levels. Will be investing my wealth into a fortress/castle and using my purchasing power in PM’s to continue purchasing low EROI energy for I will be able to afford it.

    People say everyone gets effected but you can still insulate yourself against strife with sound money. The elite in Venezuala were a fine example following their recent economic collapse because they can still easily hide in their ivory towers. Or the elite in North Korea during the 90’s famine.

    Energy will be plentiful for those with gold.

    • “People say everyone gets effected but you can still insulate yourself against strife with sound money.”

      oh, I can just see it. “you can’t touch me, see, I have gold!” ….

  7. Proof there is no need to increase any taxes:

    https://www.youtube.com/watch?v=T2aif0Wk9E0

    https://youtu.be/hWpbQfkv8Z4 (Jump to the 7:00 minute mark)

    https://youtu.be/1pRPBKJQnyU

  8. Wouldn’t the paper price of gold and silver implode as well too?

    Unless the pm paper market breaks, I can’t see how silver and gold would increase 10x + or –

    If paper markets break, I could definitely see value of physical gold and silver going up though.

    Thing is central banks have been pretty sneaky at pulling the financial system back from the precipice, so I wouldn’t recommend putting all your money in physical unless you are willing to wait years and lots of volatility in between.

    • Gold Silver,

      The paper markets WILL BREAK, due to the collapsing oil price and production. Fiat currencies, most paper assets and real estate only have value due to energy. When the oil price collapsed in 2015, the value of most paper assets and real estate continued to be elevated. They are being propped up by the massive liquidity injections and government stock and bond purchases.

      However, this won’t last another five years.

      steve

      • Steve, could you maybe write one article about what will potentially happen to Precious Metal Stocks in the coming Thermodynamic Oil collapse. Are they a good investment, maybe only limited? Or will all of these companies not be able to function at all because there is no fuel anymore? Will some of them survive? Are they potentially a lever on the Precious metal price or is that misleading? Are companies that simply store ounces in the ground like First Mining Finance better than already producing companies?

    • “Wouldn’t the paper price of gold and silver implode as well too?”

      for a short time. 90% of all “money” in the world is electronic, and mostly “value” in the world consists of assumed future payments – it’s all a pyramid scheme. as the defaults snowball and asset confiscations begin there will be a mad dash and window of opportunity for physical paper cash (NOT g/s, because everyone will be trying to cover their positions in-system, not out-system. in fact you’ll see a madhouse sale of g/s.)

      and then out-system will dominate. the fiat debt dollar, electronic or physical will have no meaning. g/s will have almost no meaning. guns will have lots of meaning.

  9. “Only after the last tree has been cut down, Only after the last river has been poisoned, Only after the last fish has been caught, Only then will you find that money cannot be eaten.” Old Cree Prophecy

  10. Slithereen Guard | November 7, 2016 at 9:01 pm |

    can i contact you through email?

  11. Slithereen Guard | November 8, 2016 at 8:09 am |

    one thing the writer is missing is the economic destruction that will if such a deflation happens.
    layoff, companies closing down or working with minimum employees. causing further deflation. a vicious cycle.

    when companies and services start closing down faster than demand. then the supply of products will fall faster than demand. So again stagflation takes over.

    if people panic and tries to buy products whose price is rising as a store of wealth, then hyperinflation takes over.

    • DisappearingCulture | November 8, 2016 at 11:35 am |

      “if people panic and tries to buy products whose price is rising as a store of wealth, then hyperinflation takes over.”

      That point hits the nail of the head.

      Also it they just try to buy necessities they have been putting off the purchase of. ANY cause of significantly increased velocity of money

  12. The crisis would not stabilize until the population drops 75%. Then the economic and energy models will work again.

    • Two men are responsible for 80% of the population. Fritz Haber and Norman Borlaug. Borlaug’s Green Revolution effected mostly 3rd world countries. Note how World population goes exponential around 1913 when Carl Bosch industrialized Haber’s 1909 invention/discovery to start industrial agriculture.

      I suspect the die off will exceed 80% due to Environmental and soil degradation caused by Monsanto and others. .

      • “The crisis would not stabilize until the population drops 75%”

        “I suspect the die off will exceed 80%”

        such touching innocence. it will overshoot considerably beyond .75 or .80

        • A few will remain. Adams & Eves.

          Probably not 25%, even though 1.5B is a civilization-sustaining number for the planet. Our “murder-technology” is stunningly better than our “living-technology”.

          • “Adams & Eves.”

            yeah, like the cover of that book, “a distant eden”. woman and man, standing at the edge of the beautiful wilderness looking down on vanishing civilization, he all galumphy in his combat gear, she standing all stylishly hot in a mini-skirt and high-heals alongside him ….

            it’s all black-and-white silhouette, so you can’t see the dirt ….

  13. Diogenes Shrugged | November 8, 2016 at 4:36 pm |

    “Monetary deflation” and “price deflation” are not the same thing. As has been pointed out so eloquently since at least 2008 on the TAE website (https://www.theautomaticearth.com/), monetary deflation involves two trends: 1. a deep reduction in the supply of fiat in circulation, and 2. a deep reduction in the velocity of transactions. Since nearly all of the fiat in circulation was originated as a debts to banks, it stands to reason that a reduction in the supply of circulating fiat will result in an increase the purchasing power of fiat still in circulation. (The reduction in the supply of fiat being due to a catastrophic cascade of delinquencies and defaults.)

    The deflation we’ve been experiencing since 2008 has been offset by bank issuance of additional un-repayable debt. But the only money that matters is the money in circulation. If banks deposit excess reserves with the Fed, it’s effectively the same thing as burning the money as far as the economy is concerned. So most of the QE money wasn’t inflationary; it remains effectively non-existent, like secretly buried gold.

    That said, the reason for my post is to vent steam over cavalier use of the term “hyperinflation.” I would argue that we hit peak monetary inflation years ago, and that the consumer and industry are no longer in a position to assume additional mountains of debt. The banks know that mountains of additional loans won’t be reliably serviced, much less repaid (thus their reluctance to make loans, and instead deposit excess reserves with the Fed). So, if inflation can no longer adequately offset deflation, where the hell is this “hyperinflation” going to come from? Maybe some of you aren’t aware that our money supply comes from loans, not an ink-and-paper printing press.

    If pallets of free hundred dollar bills were placed on every street corner in every major city, and dropped from helicopters into every back yard, that money would not be free-and-clear. It would still originate as debt, as an encumbrance on taxpayers, to be paid back to the banks at interest. It would represent an ephemeral fix for some, a transfer of wealth, not a creation of wealth, and would soon destroy any government or bank engaging in it. That would be hyperinflation. If the government were to decree that Monopoly money and poker chips would henceforth be considered legal currency, that would be hyperinflation. Do the pundits predicting hyperinflation really believe such nonsense will occur? Hyperinflation is a political event, not a monetary trend.

    The factors producing hyperinflation simply do not exist in the U.S., nor could they possibly exist until the government takes the power to issue fiat back from the Fed. And if that happens, and if government-issued money comes in the form of a gold-backed currency (albeit unlikely), then “hyperinflation” is nothing more than a bogeyman. But the term is certainly useful — I use it to identify the intellectual featherweights among those who’ve struck gold pontificating about financial matters these last several years.

    I think SRSrocco and the TAE have both made a good case, whether conscious of it or not, that this deflation could very well be the last GLOBAL financial-economic event in the story of mankind. If you’re concerned about the aftermath, stockpile barter, and learn to farm with a plow.

    • Slithereen Guard | November 8, 2016 at 11:04 pm |

      the government will have to print their way out to fund their activity.
      print to pay the debt.
      print to pay for promises they have already made.

      so there is good chance of hyperinflation.

      also, there is so much wealth in bonds and stocks, that fiat currency, gold, and cryptocurrency cannot absorb that wealth.

      so that wealth will either evaporate or try to save itself, by buying whatever products is left in the market. that is a recipe for hyperinflation.

  14. The Deflation take place.Total crash in miner stocks.Some of the best juniors from the top -55%.
    Hopefully Trump take a lot of money for the infrastructure.If not i see black for PM.

  15. My newest theory is, that the FED try to destroy the small miner companys and then the big american and canadian miner buy out them supported with FED dollars.

  16. Any sustained deflation in securitized debt, stock etc. asset values would lead to a cascading collapse of the financial system. Everybody running the show knows this and so I would conclude that there is NO WAY it will be allowed to happen. With a digital fiat system, regardless of whether it is based on the USD or SDR, unlimited amounts of fresh credit (aka liquidity) can be pumped in by the central banks working in concert. They are doing this already, but they can increase the amounts at any time and feed it into the top of the banking food chain without the wider market even seeing what is going on under the surface. Ultimately this is going to cause massive inflation in the price of consumables like oil especially if production continues to drop. This is my two cents on why I think Steve is wrong on the deflation prediction even if he nails it on all the real world factors. Basically money is fantasy at this point and looking at it from a scientific or engineering perspective isn’t going to lead to correct conclusions.

    • “Everybody running the show knows this and so I would conclude that there is NO WAY it will be allowed to happen.”

      there is no way to prevent it.

      “With a digital fiat system, regardless of whether it is based on the USD or SDR, unlimited amounts of fresh credit (aka liquidity) can be pumped in by the central banks working in concert.”

      (shakes head) you fail to understand. the usd/sdr is not mere digital fiat. it is digital fiat debt. printing more does not sustain the system, it burdens it further. they can print all the debt they want, but what they cannot print is debt payment value.

Comments are closed.