Skip to comments.ART CASHIN: We Are At Risk Of Hyperinflation
Posted on 07/27/2012 3:58:20 PM PDT by blam
ART CASHIN: We Are At Risk Of Hyperinflation
Jul. 27, 2012, 5:55 PM
Art Cashin, director of floor operations for UBS Financial Services, is sounding the alarm on hyperinflation.
"There is plenty of money around but its not finding its way into the system," said Cashin in an interview with King World News.
By standards, the amount of liquidity thats around the globe should be hyperinflationary. It is not. It is because when Bernanke flies over your house and drops millions of dollars in fresh cash on your lawn, you are so terrified you pick it up and store it in the garage. Theyve got to find a way to unlock all of that liquidity in the garages around the globe.
This is a very, very different time than virtually anything weve seen before.
Read more at KingWorldNews.com.
(Excerpt) Read more at businessinsider.com ...
I have loads and loads of respect for Art Cashin, but in this regard, I believe he is as wrong as it’s possible to be.
This guy has an intuitive grasp of the obvious.
Hyperinflation will be no accident - Obama has worked long and hard to make it likely.
He's not far off - in fact, I think he's not telling it nearly as bad as it really is.
We are at the beginning of a global financial collapse - and quite possibly another global war - all to begin taking place any day now.
Improved work methods.
Let me give you an example ~ CALL CENTERS ~ 50 years ago they were few and far between. Satellites went up to improve international communication and now you have obnoxius guys in India harrassing debtors worldwide to pay their bills, AND Philipinos with perfect English accents tell your employees how to put Tab A in Slot X while doing a tie-down on Flange 7.
Satellites encompass every single one of the features of the 'problem'.
So, another example. Guy has a field of clover to plant just outside Seymour, Indiana. It's big. It's flat. The horses that run in the Kentucky derby will dine on it. So, he looks at that field and wonders how he can get it ploughed, dressed out, sewn and then harvested with minimal cost ~ and certainly no medical insurance, unemployment insurance, etc.
He contacts a local company that puts him in touch with some applications roboticists who work in Indianapolis, and they come in and hook up his tractors to a satellite harness that will control their work from one end of the enormous field of clover to the other.
The machines are out working in a couple of days ~ day and night ~ and without lights!
The horses get fed the old fashined way though ~ a guy with a 2nd grade education fresh in from Guatemala fills their troughs with grain, and tosses in a bale of clover for their dessert.
You take that same approach to everything in the world and pretty soon the only guy with a job is the fellow who feeds the horses at Churchill Downs for two weeks once a year.
Because of dramatic, almost incomprehensible increases in the total aggregate national productivity level, our currency and other stores of value are appreciating in value ~ while Bernenke and others are running the presses day and night trying to deflate our way out of incredible levels of debt.
So there's probably hyperinflation out there, but it's in an uneasy balance with hyperdeflation.
Oh, I wouldn't be so sure. Price inflation depends on expanding the money supply, but prices only actually start to increase when people lose faith in the currency [and/or the government that administers it] and start spending it in fear of its impending loss of purchasing power.
We haven't gotten there yet, but the built-up pressure is becoming irresistible.
If...rather... when all that reserved money springs free and begins to chase the scarce amount of goods and services available there will be inflation like Germany in the ‘30’s, maybe even worse. The present creeping inflation, or rather dollar devaluation, can easily be studied by looking up the prices of almost anything from the 40’s, 50’s or 60’s. Gas 15 cents a gallon, new cars under $1000, homes $6000, cigarettes, $.15 not per each but per pack. Movies were $.25 and popcorn a dime. Typical high wages were $6000 to $8000 per year. As the government created inflation to pay off the war/s more monopoly money crept into the system and caused the escalation of prices/wages benefits etc. It was true then...it is even more so today. Quantitative easing 4.0.15
That is my view. I’m not going to tell you I have any better crystal ball than anyone else, and of course, it’s very important to define terms before embarking on this debate: More expensive groceries does not necessarily mean inflation, though that is probably what 75% of people think of when they picture “inflation” (and I myself think that too on an instinctive basis, but it is not correct)
Inflation in some things, yes. Hyperinflation? Not yet and not very soon. With so much currency fixing (e.g., our USD pegged high, while our country lacks production), inflation won’t happen as naturally as usual. It will come in a storm resulting from our lack of manufacturing production and dependence on the same continuing in Asia.
From The Collaborative International Dictionary of English v.0.48 :
Inflation \In*fla”tion\, n. [L. inflatio: cf. F. inflation.]
3. Persistent expansion or increase in the general level of
prices, usually caused by overissue of currency, and
resulting in a reduced value of the currency. It is
contrasted with deflation, and is when it occurs to a
very high degree is called hyperinflation. [U.S.]
[1913 Webster +PJC]
I’ll try to explain very briefly, without trying to cover all the nuances, why I don’t think giant inflation is in the cards for the US. I don’t call myself or hold myself out as an expert in this, by the way. I just try to read a lot and try to avoid reaching inflexible conclusions.
There are several different types of inflation: Cost-push, demand-pull, asset bubble, and wage spirals. There are hybrids of those. Classicly, in a fiat system, money comes into being by being lent. Oh, there is modest lending going on, but I do not think it is outrunning the amount of money that is being destroyed in real estate. Student loans are also being done, and those in aggregate are a staggering amount of money. But those aren’t producing much at present and I think most would agree that greater and greater levels of student loans are destined to default. So, with RE and those loans, IMO going forward a great amount of loan defaults = destruction of money, is baked in the cake. And while there is modest RE lending going on, anecdotally, it is tough to qualify for loans and thus I do not expect much upwards pressure on RE prices. We *may* be at an interim bottom in RE prices but (unless you steal something) I do not think that RE is going to take off on yet another parabola.
If gas went to $10 or $15 in a 1/6th of the population-on- food-stamps environment, most of underbelly of the entire economy simply would grind to a halt and there would be civil unrest. If the US Gov were to try to borrow to fund triply-expanded welfare programs, I strongly believe the world would demand a much higher interest rate which would kill the US’ ability to refinance its debt. You know and I know that the longer term avg of US 10-year rates is more like 5-6-7%. If those rates suddenly prevailed today, the US economy would detonate. It is this feedback loop that IMO will prevent hyperinflation. And RE would enter into a further death spiral.
Wages aren’t going to double. Gas isn’t going to double. Groceries are indeed going to get more expensive and they will slow creep up in a most irritating fashion. IMO lots of money is being destroyed via loan defaults and there are some that see that while most of us just see the higher grocery prices.
Now, we could talk about some sort of external shock, but neither of us can really predict how that might play out. But I stick to my single-reference reality point that if gas doubles, the economy would be smoked. And I do not think that would be in interest of our exalted bankster masters.
The stock market really screamed the last 2 days, but again, IMHO, this is mostly due to the stronger Euro > weaker dollar. Gold prices seem to ratify the weaker dollar, at least right at the moment.
I’ll fully admit, there are way too many moving parts in the world economy and politico situation to make confident predictions. Except, I will predict, that fraud will continue to be the primary, most dominant business model.
There isn’t hyperinflation yet because:
1. Wealth destruction via housing market, equities
2. People are paying down debt
3. Sterile investments-precious metals, the mattress
4. Less lending, therefore less money creation via fractional reserve
5. Regulation and general climate of fear slowing growth.
6. Unregistered and hidden money supply siphoned into the expanding underground economy worldwide.
7. Taxes. More money sucked back into the government where the money velocity ceases, and wealth creation dies because of misallocation of capital.
It's called progress and it's spread is exponential. It will never be stopped and will only increase. Adapt or perish.
The economy is growing at 1.5% GDP today, and will be expanding at greater than 2% in less than 3 months.
Cashin is blowing this economic call. He’s going to miss the entire recovery.
Those are recovery numbers?
I thought I'd read that a GDP of about of 2.5% was required to 'break-even.'
I think your comments are perfectly sensible and correct. But where do we go from here?
If Romney is elected, Obamacare repealed, and the Bush tax cuts extended, I think the economy will take off. It's at that point that the danger of inflation will manifest itself.
Bernanke claims to be wise enough to head off price inflation before it gets out of hand. Let's hope he is.