Winning in the Hyperinflation Deflation War
Stock-Markets / Financial Markets 2011 May 13, 2011 - 01:52 PM GMTBy: DeepCaster_LLC
“… the U.S. dollar remains on track for an eventual complete collapse in a hyperinflation, and the roots of that hyperinflation remain imbedded in the system. The primary hedge against losing U.S. dollar purchasing power remains physical gold (and silver), with some funds outside the U.S. dollar…
Today (May 6th), stocks are soaring as we go to press, purportedly due to an upside surprise in April nonfarm payroll growth, a gain of 244,000…
…thanks to QE2, the Fed effectively has monetized more than the entire net issuance of U.S. Treasury debt (to be held by the public) during the last five months. Ostensibly, the Fed has done this in an effort to stimulate the economy and to debase the U.S. dollar (create inflation). While the Fed has little chance of turning the economy to sustainable economic growth, it has been successful in triggering an upturn in consumer inflation. That has been seen in recent months and likely will be reconfirmed in the week ahead.
I contend that the Fed’s liquidity actions are tied more banking system solvency concerns than to the economy, which continues to stagnate, where elements such as construction are showing renewed economic contraction, after a period of extensive bottom-bouncing. Disappointing economic activity likely will provide the public excuse for QE3…
Birth-Death/Bias Factor Adjustment. Despite the ongoing and regular overstatement of monthly payroll employment—as evidenced by the regular and massive, annual downward benchmark revisions to the reported payroll numbers—the BLS keeps upping its monthly biases in post-benchmark reporting. For April 2011, there was a positive monthly bias used of 175,000 jobs, up from the revised estimate of 141,000 used in April 2010. In March, the net bias was a boost of 119,000 jobs. These upside biases reflect an ongoing assumption of a net positive jobs creation by new companies versus those going out business. Such becomes a self-fulfilling system, as the upside biases boost financial-market and political needs with relatively good headline data, while also setting up the next year’s downside benchmark revisions, which traditionally are ignored by the media and the politicians.”
“Commentary No. 367: April Labor Numbers, Money Supply, Dollar and Precious Metals”
John Williams, Shadowstats.com**, 5/6/11
“As the economy stumbles the American standard of living recedes. 44 million people are using food stamps and in one year that figure will be 60 million. Washington and Wall Street say, what me worry? Of course not they are the masters of the universe. We are 24 months into an inflationary depression and it still goes undiscovered. Who cares that the issuance of food stamps is up 80%, as long as the bonuses on Wall Street and in banking continue to flow and bureaucrats get higher and higher salaries and benefits? The high cost of health insurance, no longer affordable to most have increased and Medicaid users are up 17%, as the program costs increased 36%. Those on welfare rose 18%, as costs rose 24%. It is now evident to many that the choice of early retirement in the late 1990s at 52 and 59 years old was a big mistake. Many must now work into their 70s, or starve. Many retirees are forced to reenter the workforce. Recently there were 2,000 job openings and 75,000 people applied. How is that for recovery? The birth/death ratio is bogus and real unemployment is 22%. The economy needs 2 million new jobs a year and that is impossible. Good paying jobs are still being offshored and outsourced. How about the millions without jobs now for years? While all this transpires the Fed bails out Wall Street, banking and government and leaves crumbs for the dispossessed.
It always gets us when these acceptable writers use soft or euphuistic phrases to describe creeping national state socialism. The big picture is dreadful, but government, Wall Street and the media won’t tell you that. Truth has nothing to do with business. They all spin one lie after another…
In the US and all of these nations we see more than 50% of the population functionally illiterate and this same group country to country essentially pays little or not taxes, and receive benefits from government. That does not include the illegal alien population in each country that pays virtually no taxes. Spending far beyond tax receipts can only mean eventually that the deficits will destroy the system. That means a lower standard of living…
At the root of the problems of all these nations is Keynesian economics, which has become the basis for corporatist fascism. The growth of money and credit worldwide has been exponential and continues apace as nations refuse to cut spending and central banks continue to be fonts of money and credit for their financial sectors and for governments.”
Bob Chapman.com, The International Forecaster, 5/7/11
“A Senate committee has laid out the evidence. Now the Justice Department should bring criminal charges.
They weren't murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.
…America has been waiting for a case to bring against Wall Street. Here it is, and the evidence has been gift-wrapped and left at the doorstep of federal prosecutors, evidence that doesn't leave much doubt: Goldman Sachs should stand trial.
The great and powerful Oz of Wall Street was not the only target of Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, the 650-page report just released by the Senate Subcommittee on Investigations, chaired by Democrat Carl Levin of Michigan, alongside Republican Tom Coburn of Oklahoma… providing a panoramic portrait of a bubble era that produced the most destructive crime spree in our history — "a million fraud cases a year" is how one former regulator puts it. But the mountain of evidence collected against Goldman by Levin's small, 15-desk office of investigators — details of gross, baldfaced fraud delivered up in such quantities as to almost serve as a kind of sarcastic challenge to the curiously impassive Justice Department — stands as the most important symbol of Wall Street's aristocratic impunity and prosecutorial immunity produced since the crash of 2008.”
“The People vs. Goldman Sachs”
Matt Taibbi, rollingstone.com, 5/11/11
“Christopher Ecclestone, a mining strategist at Hallgarten & Co., delivered the talk. He had a good line about the Chinese. He said they are more interested in natural resources than they are in intellectual property “because they know they can rip those off. It’s harder to rip off a coal mine.”…
Ecclestone’s main idea, though, is that what we’re seeing isn’t anything new. It’s not a new supercycle for mining, but more a return to normal. The aberration, he says, was the period from 1973–2003, when mining experienced its dark age.
The aberration was the kind of thinking that took natural resources for granted. “Metals and agricultural commodities were the epitome of cheap — regarded with some contempt as common and plentiful,” he said. “The apogee of this disdain for minerals was during the tech boom.”…
The 1973–2003 time frame “was a calamitous period for miners and commodity producers,” he continued. “The only commodity for which the sun shone was oil, and even then the late 1990s were gruesome.”…
Metals became loss leaders. Capital spending fell. Exploration came to a near halt. Most of the mines in Africa closed…
But now, Ecclestone says, we are returning to something that more closely approximates what prevailed for a much larger slice of history.
The normal state is one that understands and recognizes the value of mineral commodities. The normal state is one in which the producers of these useful rocks and metals earn rewards for the risk and ownership of scarce resources.
Today, there are no new mega mines. The stockpiles are dwindling. That low-hanging fruit is gone…
“[What we are seeing] is a reversal of the late-20th century trend, which gave all the value to the service and intellectual property… The whip hand is now back with the owners of the inputs.”
“The World Right Side Up: Plus, three stocks set to rise in the second half of 2011”
Chris Mayer, Agora Financial, 5/6/11, quoting Christopher Ecclestone
“(Q): So when you talk about this potential commodities boom, what industries in the United States would benefit, aside from the commodities producers themselves?
Rogers: Everybody who has second homes in Iowa would be rich because all the farmers are going to be stunningly rich. You want to buy a lake house, buy it in Iowa or Oklahoma. Don't buy it in Massachusetts. You know, the stockbrokers are going to be broke. Buy where the people are going be rich. Open yourself a chain of restaurants in the agriculture area or department stores or hotels. Anything that you want to do in an area where people are making lots of money, you'll make a lot of money, too... just because they're rich.
Certainly, [look at] the seed manufacturers and the tractor manufacturers, backhoe dealers, everybody who has anything to do with production of raw materials is going to get rich. I don't know if you've been to North or South Dakota recently - they can't fill the jobs. There are massive numbers of jobs. The places are booming no matter what you want to do.
Go there. And if you have half your wits, you'll make a lot of money…
Rogers: You can buy farmland. You can buy agricultural products. You can buy stocks that will benefit if you're a good stock picker. You can invest in countries that will benefit. Canada is going to have a better economy than the United States. Australia is going to have a better economy than Belgium.“
“Jim Rogers: Long Agriculture, Short Bonds and... Soccer?”
Garrett Baldwin, Investment U E-Letter, 5/10/11
Wealth or Catastrophe are two alternatives for Investors as The Hyperinflation/Deflation War plays out.
Determining which will “Win”, and When, is essential to Investors’ future Wealth Preservation and Profit.
In our view, acquiring certain Key Assets is essential to Wealth Preservation and Profit, in the long run.
What are they?
They will reveal themselves as our following Hyperinflation/Deflation Analysis is developed.
Among the Main Deflationary forces are
- High Unemployment which shows no sign of abating;
- Sluggish Economic Growth, and,
- an unabating Housing Price Deflation which stretches far beyond the USA to, for example, Spain and Australia.
Among the Main Hyperinflationary Forces are
- The seemingly endless Money Printing by The Fed and other Central Banks.
- Out-of-control Borrowing and Spending will “require” continuing debasement of Fiat Currencies’ Purchasing Power.
- Unpayable Sovereign Debt and Interest loads which also makes debasement of Fiat Currencies Purchasing Power a Preferred Option, since more Fiat Money will be created to Pay these Debts.
Of course, either Hyperinflation or Deflation is possible “next”. Or Deflation could follow Hyperinflation in a few years (our view of the most likely Scenario).
But we think it highly likely that Hyperinflation will arrive first (indeed Real U.S. CPI is already 10.69% per Shadowstats.com ** -- see note below), and for that we must prepare because:
- Almost Ad nauseam we are reminded that the Bailouts, Stimuli, and QE have injected Massive Amounts of Liquidity into the Economy (although, much of it has gone into bank reserves) via the QE process, and the additional Capital Created thereby has fueled dramatic Price Increases in Food and Fuel.
It is elementary that increases in Fiat Money supply well in excess of GDP is price Inflationary. Thus, we have had the recent Commodities, including especially Food and Energy, price Inflation.
- The USA, France, the UK, Ireland, Spain, Italy, Portugal and Greece, among others, have debts which are unpayable, given any reasonable projections of Economic Growth, National Income and Taxation. Several of these are already paying Interest on Interest.
Thus the Only Alternatives are Outright Default (highly unlikely) Bank Haircuts (not likely to the degree necessary to “solve” the debt problem – though Iceland has set an admirable precedent in this regard by forcing partial “defaults”), and/or continuing Fiat Currency Purchasing Power Debasement (the most likely).
Since the Debts are unpayable, outright Defaults are unacceptable, continuing Fiat Currency Devaluation (in terms of lost Purchasing Power) is most probable. We thus expect the US Dollar, for example to be taken down at least as low as 54, basis the USDX eventually, and, perhaps, to collapse entirely in the next decade. (But see our Forecasts in our latest Alert in ‘Alerts Cache’ at www.deepcaster.com.)
This Probable Prospect makes Asset Selection for the long haul, rather simple.
Consider that as the Purchasing Power of Fiat Currency Degrades, the Fiat Currency Price of Real Money (Gold and Silver) increases. But, regarding Investing in Gold and Silver, there has been and continues to be a challenge. While they are understandably in an uptrend, their prices continue to be subject to periodically intensified Cartel Takedowns, as we have very recently seen, again.
*We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
Thus it is important to buy them at the right time and in the right form. (See Deepcaster’s Alert “What Next? Forecasts: Gold, Silver, Key Commodities, Equities, Crude Oil, U.S. Dollar, Interest Rates, & U.S. T-Notes & T-Bonds” in the ‘Alerts Cache’ at www.deepcaster.com.)
Indeed, given recent Revelations that major Precious Metal Repositories do not have all the Physical Metal they claim they do, Buyers are increasingly Wisely taking Delivery and Personal Possession.
Indeed, an Investment Legend and Precious Metals expert who has a remarkable record of Superior Asset Selection with Excellent Timing is Harry Schultz. Uncle Harry recently cut his workload and now writes for The Aden Report which is perpetuating Harry’s Excellent ‘Gold Shares R US’ Newsletter.
Given Uncle Harry’s Wit, Wisdom, and Distinguished Track Record, we were honored recently to receive Harry’s comments about our newsletter and specifically about our May 6 Forecasts Alert.
“This is a classic issue, perhaps your best I’ve seen.
Very bold of u to stick neck out on all these fronts.
But IMO u have a good nose for mkts
& u savey right--as they dovetail. Absence of dovetailing means U R wrong.
I agree with your projections on all of it.”
Uncle Harry Schultz
May 5, 2011
And in the May, 2011 Aden Forecast Letter, Uncle Harry writes: “….Subscribe to www.deepcaster.com; get May 6 forecast issue”.
In addition to Gold and Silver, there is one other Sector which provides excellent protection against hyperinflation. That Sector is Food, including Food Producers and Processors. Food Prices have a Floor under them (due in large part to annual 80 Million/ Year World Population Growth) which even the Energy Sector does not have, because Energy Prices are vulnerable to Economic Slowdown.
Thus in addition to Gold and Silver, we second Jim Rogers injunction above – Food and Selected Food Producers and Processors are an essential Asset Class for Investors’ Profit and Protection with Hyperinflation looming.
Therefore, even more than Energy or Even Precious Metals, Food and Potable Water must be at the top of Consumer Shopping lists everywhere around the world. With demand increasing from the 80 million plus annual world population increase, and increased resources of a growing Middle Class, especially in BRIC countries, to buy more and better Food, Food Producers and Processors are in the Catbird Seat. The Problem (and Profit Opportunity for Investors!) is exacerbated by the fact that most of the World’s best arable land is already under cultivation, and the fact that Modern Agriculture is very Fossil-Fuel-Energy-Intensive.
Bottom Line: Gold and Silver Investors should also invest in selected Food Producers at the Right Time, because the Factors which help cause Gold, Silver and Crude Oil Prices increases, will also continue to impel Food Price increases, almost regardless of Economic Conditions.
Thus, Deepcaster recently recommended two such Food Producers and one Water Producer and Management Company, all of which we believe to be deeply undervalued (one is trading at under $6/share and the other two under $2/share), in our recent Letters and Alerts.
One is China’s largest producer and Seller of Fresh Fruits and Vegetables. It also grows Rice and breeds and sells livestock and has over 20,000 employees. It recently had a P/E Ratio under 4 and profits have grown over 20%/yr. As we write it is trading at around 60 cents per share U.S. or just below $5 HK, near its 52 week low.
To Consider these three “Best of the Best” Food Sector Core Position Investments, read our March Letter – “Main Gold, Silver & ‘Sleeper’ Sector Price Movers; ‘Sleeper’ Buy Reco.; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar, and U.S. T-Notes & T-Bonds; March 2011 Letter”, and our Alerts – “Golden Green Opportunity Buy Reco.; Forecasts: Commodities, Gold, Silver, Equities, Crude Oil, U.S. Dollar, and U.S. T-Notes & T-Bonds” (week ending February 4, 2011) and “Eye of the Storm; ‘Liquid Gold’ Buy Reco.; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar, and U.S. T-Notes & T-Bonds” (week ending February 11, 2011) in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at www.deepcaster.com.
Chris Ecclestone and Jim Rogers are correct. The ‘Whip Hand’ is now with the Real Asset Providers and the Ultimate Real Assets are Food, and Gold and Silver – Real Money which one can use, inter alia to buy Food!
Best regards,
Deepcaster
May 13, 2011
**Note: Shadowstats.com calculates Key U.S. Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported May 13, 2011
3.16 % 10.69 % (annualized April, 2011 Rate)
U.S. Unemployment reported May 6, 2011
9% 22.3%
U.S. GDP Annual Growth/Decline reported April 29, 2011
2.28% - 2.60%
U.S. M3 reported May 6, 2011 (Month of April, Y.O.Y.)
No Official Report 0.57%
Best regards,
By DEEPCASTER LLC
www.deepcaster.com
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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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