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53 comments on DrumBeat: May 30, 2009

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DIYer on May 30, 2009 - 3:28pm Permalink | Subthread | Parent | Comments top

I think it's been mentioned here before, but the downslope after the peak is apt to give rise to speculative bubbles. As for the dollar, it's a piece of paper which is worth whatever you and your counterparties believe it is worth, end of story. Interestingly enough, a krugerrand is a piece of metal for which the same thing is true.

You know, after stumbling on TOD in 2005 I started following the writings of some of the 'goldbugs' and putting retirement money into Central Canada Fund, etc. They'd run these stories to the effect of "Oh noes, they're printing money faster than evar!" perhaps accompanied by footage from the Bureau of Engraving of currency sheets sliding off the intaglio press. Then the selloff in '08 demonstrated that nothing of value is immune to market fluctuations. Nothing. Turns out the goldbugs don't have any more idea than I do whether the market, the dollar, or platinum will go up or down next week.

As for Goldman blowing some of the speculative bubbles, nothing they do shocks me any more. Could well be true. But for Zim$ style inflation, I wouldn't expect it any time soon. The 'bugs' have been making this same dire prediction for forty-odd years and just might be right this time. Or not.

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Charles Mackay on May 31, 2009 - 6:45pm Permalink | Subthread | Parent | Comments top

I’ve researched the issue of hyperinflation very thoroughly. Weimar Germany entered its period of paper mark depreciation when its combined internal budget deficit and external trade/finance deficits were very similar to that which exists in the US today.

Hey - don't take my word on that, read up on that yourself.

Also you might also want to know that 'Black Swan' author Nassim Nicholas Taleb is now betting on hyperinflation.

Good luck to those betting on deflation.

MAY 31, 2009, 5:55 P.M. ET.
New Universa 'Black Swan' Fund to Make Bets on Hyperinflation

A hedge fund firm that reaped huge rewards betting against the market last year is about to open a fund premised on another wager: that the massive stimulus efforts of global governments will lead to hyperinflation.

The firm, Universa Investments L.P., is known for its ties to gloomy investor Nassim Nicholas Taleb, author of the 2007 bestseller "The Black Swan," which describes the impact of extreme events on the world and financial markets.

Unlike last year's sudden market implosion, inflation isn't an unimaginable event that few currently anticipate. In fact, many fear inflation right now amid government efforts to goose the economy. Universa's bet, however, is that inflation will reach levels few expect.

http://online.wsj.com/article/SB124380234786770027.html?mod=djkeyword

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Dezakin on June 1, 2009 - 4:14am Permalink | Subthread | Parent | Comments top

Weimar Germany entered its period of paper mark depreciation when its combined internal budget deficit and external trade/finance deficits were very similar to that which exists in the US today.

Not even close. For a start, Weimar Republic obligations were denominated in something they couldn't print. Second, the US hasn't engaged in any quantitative easing at all.

This doesn't mean that eventual inflation in the US isn't a threat (after economic recovery), but the analogy of Weimar republic is ridiculously wrong.

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53 comments on DrumBeat: May 30, 2009

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