Tue 2010-08-24 20:21 EDT

Gonzalo Lira: How Hyperinflation Will Happen

Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain...For its part, the Federal Reserve has been busy propping up all assets--including Treasuries--by way of ``quantitative easing''...But this Fed policy--call it ``money-printing'', call it ``liquidity injections'', call it ``asset price stabilization''--has been overwhelmed by the credit contraction...the next step down in this world-historical Global Depression which we are experiencing will be hyperinflation...Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It's not that they want more money--they want less of the currency: So they will pay anything for a good which is not the currency...Treasuries are now the New and Improved Toxic Asset...there will be a commodities burp: A slight but sudden rise in the price of a necessary commodity, such as oil...asset managers will sell Treasuries...right before a largish Treasury auction. So Bernanke and the Fed will buy Treasuries, in an effort to counteract the sell-off and maintain low yields...The Fed's buying of Treasuries will occur in such a way that it will encourage asset managers to dump even more Treasuries...It will be a flash panic...By the end of that terrible day, commodites of all stripes--precious and industrial metals, oil, foodstuffs--will shoot the moon...if it doesn't happen this fall, it'll happen next fall, without question before the end of 2011...

Gonzalo Lira; happened; Hyperinflation.

Fri 2010-06-18 10:24 EDT

The Progressive Economics Forum >> Remembering Wynne Godley

Jim Stanford

Progressive economists everywhere should say a thank you this week to Wynne Godley, who passed away May 13...His final major volume (published by Palgrave in 2007) was a tour de force of heterodox macro theory, co-written with Canada's (and the PEF's) own Marc Lavoie: Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth. Like Minsky, he can say ``I told you so'' to the whole neoclassical profession - although unlike Minsky, Godley could do this while he was still alive...His work exploring the implications of basic macro identities (such as the basic but oft-ignored fact that all sector deficits in the economy have to sum to zero in equilibrium, and hence not all sectors can be paying down debt simultaneously - someone must be increasing their debt to keep the money flowing) has influenced heterodox writers of all stripes...

Progressive Economics Forum; Remembering Wynne Godley.

zero hedge Fri 2009-08-28 17:15 EDT

The Oil-Gas Six Sigma Dislocation

The CFTC has earned its stripes by allowing speculators to take the oil to natty relationship to unprecedented arb levels. Represented in energy content equivalents, where oil traditionally has been in the 6x-12x range for gas, the most recent reading is 26.36! This is, as the chart indicates, your six sigma event for the day. A long NG1 - short CL1 arb may take some abuse but absent Amaranth coming out of somewhere (and even they were eventually prosecuted), this relationship should collapse to some semblance of normalcy. Although in this bizarro market it is guaranteed to do the opposite of what any fundamental or technical relationships dictate.

Oil gas; Sigma Dislocation; Zero Hedge.