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2008-11-30 Home Front Economy

Internal CITI Memo Predicts Either Hyperinflation Or Civil Disorder

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Posted by Anonymoose 2008-11-30 00:00|| || Front Page|| [1 views ] Top

#1 I wonder if it ever crossed Topjobs mind that we could get both.

The crappy nation states get civil disorder due to depression and the western nations get a combination of deflation from the weak economy being offset by the inflationary actions of central banks. Disinflation?

Whatever we want to call it, for the near future, durable goods will most likely deflate and consumables will most likely inflate.

Either way, Citigroup needs to stop making headlines. Get some competent management, you clowns. Without it, your bank will only be known for credit card offers.

Posted by Mike N. 2008-11-30 00:27|| 2008-11-30 00:27|| Front Page Top

#2 Inflation by definition is an excess of money and credit, a condition we had just before the dotcom crash and continuing into August 2007, when the first of the LIBOR seizures took place.

The most likely outcome is still the definition of inflation, except that price increases are more likely to be demand/supply events, not an actual reaction to inflation.

Everyone thinks of Weimar Germany without realizing the Fed is likely to slam on the breaks when Treasury bill rates skyrocket with a humongous interest rate increase.

I think what the Smart Guys™ are worried about is that the Fed will be unable to print enough money to cover all the bets they made in the last few years and because of that neglected fact, they are now currently in the glide path of an Honest to Goodness Come-to-Jesus moment, which will eventually include an all expenses paid trip to a federal prison for most of the perpetrators

Posted by badanov 2008-11-30 01:43|| http://www.freefirezone.org]">[http://www.freefirezone.org] 2008-11-30 01:43|| Front Page Top

#3 'print money'. How much of the economy is now off the paper and on the computers? Cards and automated accounting continues to displace cash in a magnitude that those who weren't around 40 years ago can't understand. A lot of the value that disappeared in the last year between mortgages and speculation has largely been accounting not printing. The use and demand for paper is largely unchanged because of that displacement. It will change if and when the banks stop authorizing individual consumer credit either based upon potential (credit cards) or actual (debit cards). From my reading, the small and medium size institutions are doing just fine to an extent that they actually did adhere to the principles and regulations put in place after the last fiasco with the Savings and Loan debacle of the 80s.

Posted by Procopius2k 2008-11-30 09:10|| 2008-11-30 09:10|| Front Page Top

#4 There is also a strong possibility of "leveraged money" hyperinflation at the same time as "cash money" deflation.

That is, in effect, we have two currencies. Cash money is backed either with paper or real goods and services; leveraged money is *based* on leverage alone. (Like taking out a $1M loan, then using that $1M as collateral to take out a $10M loan. An irrational fantasy that cannot continue.)

By distinguishing between the two economies, the cash or "real" money economy can be protected, while at the same time the leveraged economy can fail.

Actually, the leveraged economy *must* fail.

Until the leveraged economy collapses, it consumes the vitality of the real economy to try and support itself, almost like a tumor. You have to get rid of it first, before the real economy can recover.

The way to separate the two economies is for the BEP to issue very high denomination paper currency, from $100k to $10M bills. But currency that can only be transferred with US Treasury permission and can only be used by institutions, real economy corporations, not leveraged corporations or individuals.

Such bills would be sold to real economy corporations in exchange for a percentage of their liquidity large enough to prevent them from going out of business even if all the rest of their money has been looted. It would also serve the dual purpose of providing 100%+ collateral for loans, again only with Treasury permission.

This means that no matter what happens, either by their own mistakes, or the efforts of hostile outsiders, a real economy corporation cannot go out of business.

Even if their business drops to zero sales, their operations will just be suspended, not bankrupt. So when it picks up again, they can resume full production with minimum delay.

The government might even require "unemployment in place", that employees continue to go to work and do other tasks like maintenance while being paid unemployment.

Posted by Anonymoose 2008-11-30 09:17|| 2008-11-30 09:17|| Front Page Top

#5 Credit != Money

Credit IS temporary money.

Posted by Bright Pebbles 2008-11-30 09:46|| 2008-11-30 09:46|| Front Page Top

#6 It's too late anyway, the burd flu kill us all soon.

Posted by .5MT 2008-11-30 14:20|| www.cybernations.net]">[www.cybernations.net] 2008-11-30 14:20|| Front Page Top

#7 What about the asteroid in 2012?

Posted by Fester Creanter3194 2008-11-30 15:27|| 2008-11-30 15:27|| Front Page Top

#8 .5MT: It's still rated at #2, right after global thermonuclear war. Depression or not, it plays by its own rules.

Posted by Anonymoose 2008-11-30 16:12|| 2008-11-30 16:12|| Front Page Top

#9 This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

I'd reached the same conclusion and for the first time in my life become a gold bull.

'Print money' is a figure of speech. It doesn't mean literally printing paper money. It means increasing the supply of money in all its forms.

BTW, a quote I heard from someone at the US Fed stuck in my mind.

It was along the lines of,

Pointing at a bank of computers in the Fed's data center, he said, "The only real money is ones and zeros in those computers."

Posted by phil_b 2008-11-30 19:08|| 2008-11-30 19:08|| Front Page Top

#10 One other observation. While the Fed and other central banks can and do control the supply of money, the velocity of money is beyond their control and it appears to have slowed abruptly.

Good explanation at wkipedia

http://en.wikipedia.org/wiki/Velocity_of_money

Posted by phil_b 2008-11-30 19:18|| 2008-11-30 19:18|| Front Page Top

#11 Deleveraging is inevitable - thats what cause dthe crash - deleveraging the financial markets in the mortgage sector.

Same thing with the petroleim prices - no cheap loans to back insane money on futures alone, without regard to supply and demand of the actual underlying commodity.

Posted by OldSpook 2008-11-30 22:06|| 2008-11-30 22:06|| Front Page Top

23:07 phil_b
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