Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Stock Market Due for 9-10% Pull Back? - 25th April 19
Dow Transportation Stocks Sector Is Testing Resistance - 25th April 19
INSOMNIA i64 UK Best Games Festival Vlog of What it's Like to Attend - 2019 - 25th April 19
In Just 45 Mins., Learn to Spot New Opportunities in ANY Market for FREE! - 25th April 19
If This Pattern Holds True, the US Economy Could Face the Worst Stagnation in History - 25th April 19
8 Reasons Why Investment in Education Always Pays Off - 25th April 19
Want To Earn A Safe 5% In Fixed Income? Buy Preferred Stocks - 24th April 19
Can Gold Price Rise Without a Rate Cut?  - 24th April 19
Silver’s Next Big Move - 24th April 19
How Can a College Student Invest Wisely? - 24th April 19
Prepare For Unknown Stock Market Price Action As New Highs Are Reached - 23rd April 19
Silver Plays a Small but Vital Role in Every Portfolio - 23rd April 19
Forecasting 2020s : Two Recessions, Higher Taxes, and Japan-Like Flat Markets - 23rd April 19
Gold and Silver Give Traders Another Buying Opportunity - 23rd April 19
Stock Market Pause Should Extend - 21st April 19
Why Gold Has Been the Second Best Asset Class for the Last 20 Years - 21st April 19
Could Taxing the Rich Solve Income Inequality? - 21st April 19
Stock Market Euphoria Stunts Gold - 20th April 19
Is Political Partisanship Killing America? - 20th April 19
Trump - They Were All Lying - 20th April 19
The Global Economy Looks Disturbingly Like Japan Before Its “Lost Decade” - 19th April 19
Growing Bird of Paradise Strelitzia Plants, Pruning and Flower Guide Over 4 Years - 19th April 19
S&P 500’s Downward Reversal or Just Profit-Taking Action? - 18th April 19
US Stock Markets Setting Up For Increased Volatility - 18th April 19
Intel Corporation (INTC) Bullish Structure Favors More Upside - 18th April 19
Low New Zealand Inflation Rate Increases Chance of a Rate Cut - 18th April 19

Market Oracle FREE Newsletter

Top 10 AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Inflationary Understatement

Economics / Inflation Sep 21, 2010 - 10:45 AM GMT

By: Richard_Daughty

Economics

Best Financial Markets Analysis ArticleThe Market Oracle newsletter jumps into the inflation-deflation debate, and says, "Debt deleveraging deflation completely ignores the fact that we are NOT living in the 1930's, but in a globalised world economy that is seeing the convergence of real GDPs where the developing world is eating up the [world's] resources at a faster pace then the west is cutting back on consumption."


Something in my Puny Mogambo Brain (PMB) went, "Ding!" when I instantly recognized this as a classic case of the age-old supply/demand dynamic where price equilibrates demand with supply, in this case the increasing demand from the "developing world" is swamping demand from the "developed" world, meaning an increased demand, but with no mention of the physical supply of resources, which are hard to increase and are, in the short run at least, absolutely fixed.

So any increase in demand means pressure towards an increase in price.

As one would expect from the infallible demand/supply dynamic, when demand is going up when supply is not likewise going up, the market clears at higher prices, and Mr. Oracle seems to be in complete agreement with me on this, and says that increasing demand is "driving inflation higher whilst at the same time the west is engaged in competitive currency devaluations in an attempt to generate nominal GDP growth," which is where I paused, as I fully expected him to accurately finish the sentence with "which is going to destroy the buying power of every one of those stupid currencies, including the dollar, which the Federal Reserve has destroyed with their insane neo-Keynesian econometric stupidities and outright frauds to create suicidal amounts of money, meaning suicidal amounts of inflation will destroy the people!"

Alas, he did not summarize it that way. Instead, the Market Oracle wins this week's Mogambo Egon Spengler Prize (MESP), a coveted award named after the character played by Harold Ramis in the movie Ghostbusters who, when asked by the stupid little EPA investigator why the power to the containment grid should not be turned off, did not say, "Because it would release such unimaginable horrors that it would destroy us all in an unstoppable catastrophic disaster where the survivors would envy the dead, and would be unpaid slaves, cruelly treated with no salary, benefits or OSHA protections of any kind, toiling endlessly to please to a hideous demon that lives on the psychic energy of inflicting everlasting pain and suffering until the world is destroyed and every last one of us is dead after being painfully rendered asunder, tearing off your arms and legs, one after another, limb after limb!"

Instead, in a moment that will live forever as the Mogambo Egon Spengler Prize (MESP), Egon Spengler replied, deadpan, emotionless, looking right into the face of the EPA jerk, "Because it would be bad," which is, if you have seen Ghostbusters, probably the most gigantic understatement in the history of the world.

Likewise, Mr. Oracle wins the coveted "Egon Prize" by ending his sentence with "which has highly inflationary implications"!!

And with that kind of inflationary horror waiting to befall us, now revealed as chillingly foretold in a Hollywood movie, you know that I am going to advise you to put down that slice of cold pizza that you are eating before one of the kids can get at it, and buy, buy, buy gold, silver and oil stocks, which are guaranteed to go up in price when the government is so bizarrely insane, like now, that it deficit-spends enormous amounts of new money - equal to a tenth of GDP! And more! - which is a massive amount of new money created by the loathsome Federal Reserve just for the purpose, all of which increases the money supply and makes prices go up, and up, and up, and which is the absolute Worst Thing That Can Happen (WTCH)!

Before you run screaming into the night, yelling, "We're freaking doomed!" be calmed by remembering that by just buying gold, silver and oil, everything for you will be OK for you, and out of sheer amazement and gratitude, you, too, will whistle approvingly and say, "Whee! This investing stuff is easy!"

Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron’s, The Daily Reckoning, and other fine publications.

Copyright © 2010 Daily Reckoning

© 2010 Copyright The Daily Reckoning - All Rights Reserved
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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules