UK: Hendry bets on deflation

NORMALLY WHEN U PRINT LOADS OF $$ U HAVE INFLATION

Yes, but normally all those extra $, €, £ et al get used/spent. In a situation where the system is paralysed with fear/lack of trust, or where everyone is hoarding and sitting on their hands to rebuild their balance sheet or just see themselves “over the hump”, then you can print all extra cash you want, it’s not going to have any effect in the short term. Longer term, now that’s a whole other ticking device …

Blue Horseshoe

Not necessarily. Not when you have massive debt destruction running against it.

If you print £1 but I default on a £5 debt for which the collatoral can only be sold to recoup £3, that’s deflation.

Hugh Hendry is excellent, I suggest that you listen to him on Commodity Watch, commoditywatch.podbean.com/2008/ … -of-peers/

Note, he’s not even that bullish on the shiny stuff!

Except when you are countering massive deflationary forces, then one cancels out the other and you get the Japanese scenario: deflation countered by massive monetary and fiscal stimulus for as long as it takes - now almost twenty years and Japan has just entered a new deeper deflationary period.

That’s why bonds are doing really well and all other asset classes, including gold, are deflating.

Not possible with the backdrop of a crumbling world economy. In the scenario that is now presenting itself you only end up destroying the value of your currency. The US is going down the road of Zimbabwe.

So why didn’t the Japanese Yen collapse? They’ve been printing money, literally chucking it at their economy for twenty years now.

There was no hyperinflation because all they ever did was engineer a positive force (inflation) to balance a negative force (deflation).

Result: stagnation, ultra low interest rates, stable currency, low inflation, slow deflation of overvalued assets.

Get used it. We are all headed into a similar scenario.

I read that the reason why Japan didn’t go into a hyper-inflation scenario was because they exported their way out of it, plus they had large savings to tap. Apparantly, the Japanese do not save anymore. Their public debt is one of the highest too at nearly 200% of GDP. They can’t do what they did again. We are all in the shit now. Can one country pass the buck more on to another. Mmmmm. Maybe. I wonder which country will come out of this mess the first.

Don’t argue with me as I read this but did not fully understand the mechanism behind it, so I would be a lost cause to your arguments.

It’s those damn CDSs. We are giong to keep spiralliny downwards until they sort out the financial system properly (which will mean something very very drastic) and the debts are greatly reduced. I think the latter overlaps the former in some way.

Hugh Hendry is interviewed by Maria Bartiromo at the NYSE. Talks about China, and the Dow getting back to it’s peak in 25 years. Worth a watch

cnbc.com/id/15840232?video=950838437&play=1

Also, here is Rick Santelli tearing Steve Liesman a new arsehole.

cnbc.com/id/15840232?video=950303116&play=1

Dec. 5 (Bloomberg) – Hugh Hendry, co-founder of Eclectica Asset Management, talks with Bloomberg’s Pimm Fox about the outlook for global stock and bond markets.
Hendry also discusses his fixed-income investment strategy. (Source: Bloomberg)

bloomberg.com/apps/news?pid= … d2mhbFQOjs

Bartiromo was over in London the other week. Herself and Henry were both on CNBC Europe Squawk Box at the same time. She seemed to enjoy his analysis. He’ll probably make a few more appearances on CNBC America now.

Monster Lurking in the Bond Market
“The monster is still coming closer and I’ve just about run out of ways of protecting myself,” Nicole Elliott from Mizuho Corporate Bank told CNBC while taking a technical look at US and Japanese bonds.

cnbc.com/id/15840232?video=938964876&play=1

Hendry was on CNBC this morning. He was asked about the euro, and said that he didn’t believe it would exist in its current form in 10 years. He said you might have the core countries of Germany, Benelux and France, but that the PIIGS countries would have left. He specifically mentioned Ireland as being the most vulnerable to leaving the euro. Said something like “here is a country which has a land border with the UK, where prices are much lower and standard of living is higher, where the banking industry is in dire trouble…”, then he got cut off.

Not to worry, they’ll just turn on the magic money machine:

guardian.co.uk/politics/2008 … -deflation

liquidty trap here we come…

dont matter how cheap money is if demand for credit evaporates…

GLD up 4%,Barrick gold up 8%,Harmony Gold up 8%,all inflation indicators,whose got it right?

This game of tug o’war will result in the winner very soon.

From FinFacts:

             Hi      Low   Close

12/31/1932 20.67 20.67 20.67
12/31/1933 34.06 20.67 32.32
12/31/1934 35 34.06 35

Jeez, what could’ve been going on around this time???

Gold isn’t just an inflation indicator - it’s more of a turbulence indicator to my mind. It’ll do well in a deflationary depression also because of its use as money.

Civil Liberties Are Cut in this Economic War: Hendry
cnbc.com/id/28153392

Shortly after this,the US govt confiscated all the gold in America and made it illegal for individuals to hold it,I would advise anyone thinking of buying physical gold not to - for this very reason and also for the problems highlighted on other posts regarding the futures market and non delivery.Buy gold shares,and go for those companies who haven’t sold their future production forward,HUI is an ETF that only has unhedged companies.