F Dominicus Blog : inflation

Ride the wave

Friedrich Dominicus — Wed, 08 May 2013 04:37:00 GMT

but be prepared, every party comes to an end eventuallly

We see cheap money working. The stock markets soar, and that means the dangers are getting higher and higher.

You can try to ride the stock inflation wave as long as possible, but be prepared to get burned on your way. Do realize some gains even while the stock seem to know but one direction: up. You can not be surprised that the central banks party this as their "our policy is working" and not "oh shit, we're inflating a bubble". But after hights with no underlying the awakenign will come. Yes try to get as much out of it as you can, but be assured this gains are just gains in trading units. You are not reacher till you have something which "survives" the break-down.

Be assured the break-down comes, it's just the questen when and how it starts. It's sure anyway that it "comes". So enjoy the ride, as long as you can, but fear the crash and or prepare for it.

Well this subsumes why I'm thinking that way: http://www.zerohedge.com/contributed/2013-05-07/why-america-fell-so-far-%E2%80%A6-so-fast. The writing are at the wall, the debts are there also, and they will get paid in some way... That's as sure as Amen in church.

Does reality hit back?

Friedrich Dominicus — Sat, 01 Sep 2012 06:24:00 GMT

One may start wondering. Is it time that reality hits back? That money printing is a problem and not a cure?

At least it seems so. In Germany the economy encounters troubles, the export oriented firms (we do have a lot of them) see that the other countries can not buy that much any more. That can't be a surprise, if you are in economic troubles you MUST cut back you wishes. This is obvious for firms and citizens, it has been ignored and is ignored by deledefs in nearly every country since at least 50 years.

Still if the demand goes down usually the prices follow, but no. In Germany there's now over 2 % of the price inflation. Could it be that the money printing of the ECB now shows?

We Austrians know it must be so, but we are the killjoys of the economics. The base idea there is, ANYTHING can be solved by clever people. Well no. What the "clever" economics do is the mountain to be climbed not the abyss in which to tumble. All Austrians have warned since ages, don't mess with markets and especially don't play with our money. Do they have heard? No, it seems there were other streams which could counteract this dumbness, but with trillions of debts (out of thin air)? Well it seems money printing matters in the end. Do we can expect a return to sound economic action? Well I guess it will have to get much worse. But we'll see.

Some small thoughts about value

Friedrich Dominicus — Wed, 14 Mar 2012 05:32:00 GMT

It's not secret that I'm strictly against central banks. Anyway here's a small calculation on the last moves of the ECB.

They made 1 trillion Euros out of the blue. Now a trillion written is: 1 000 000 000 000. How can they do that? Oh it's simple they just say the money is there and "it's" there. Now if we assume a Golf costs 25 000 then VW could build 40 000 000 of them, they may have build around 30 000 000 Golf have been build. The Golf now is around 45 or so years in production. So if VW can has produced 30 000 000 Golf in 45 years, they can produce around 666 667 cars year. So they would need around 60 years to produce the 40 Millions of it.

Guess how long it took the ECB to create this out of the blue. 0.1 sec. Effort none, and well paper money with a value of 0 also. But assume how this diminishes the information of prices. There are one billion more of a constant amount of things. And it was not earned by individual with their preferences, it's there from now on. And well it gives the impression of being richer. But that is simply a lie, in the end it just makes the prices go up.

And what is is in the end? Just credit expansion. And that means we're on our way to broken currencies. And this after war the most dangerous things one can face. So the ECB does not do anything to fullfill their order just to keep the system running while trying to prolong the boom. We all know that can not work. And no it will not be different this time.

Fed Money at work

Friedrich Dominicus — Thu, 16 Feb 2012 05:42:00 GMT

What a suprise a new bubble is growing.

According to a German Magazine the prices for land are soaring. Within just a few years a hectare has seen an increase in price from 5000 USD to 30000 USD. That's a raise or 600 % and you can bet this is the next bubble. Fueled and fired by the ever expanding credits (called money from the FED). It all happens because of new laws and the mania to subsidy "renewable" energy. But of course the base for that all is the zero or below zero interest politic from the FED. In short money printing at work. The Fed sucks

The other big driver is the granting of patent privileges, enforced by the all so loving state. States suck.

The magazine write about the vanishing middle class. What a surprise if you take from the middle to pay the top, they surely will not get richer. Anyway the middle classes believed also in "easy" money, while using credit for buying houses. Too much credit and now what has happened this bubble has busted. And now they are in trouble, what a surprise. It's not alone the fault of the authorities (but they have made it so easy to get credits) but also the believing that this could be sustainable. Sorry vanishing middle class you suck also. You've build on credit and you get what you deserved. Not needing credit is the way to go for the middle class. Especially not using credit to pay consumption. Sorry guys, credit sucks very badly.

If you trust on credit you trust on hot air. Only real savings yield wealth. That's the all and ever true way.

This should not be burried

Friedrich Dominicus — Thu, 29 Dec 2011 07:48:00 GMT

in the comments of Mises. It's to interesting and revealing.

Here it is: http://oregonstate.edu/cla/polisci/faculty-research/sahr/sumprice.pdf

One can say after the second world war inflation is the established money policy. And that means always those who saved have been punished. Think about lending your money next time...

A new and a secret round of expropriation

Friedrich Dominicus — Thu, 17 Nov 2011 05:33:00 GMT

One just can say the break-down runs in direct confirmation of Mises predictions but also "Atlas shrugged".

People start to sell off bonds from nearly any EU country. Believe it or not Germany is not among them. Quite the opposite, the spreads from every other EU country to Germany are raising and Germany gets the money for free. Indeed they had to offer 0.8 % !!! for 6 months running bonds (AFAIK) and we have an inflation rate near 3%. Well so much to money and interest. Just remember also the ECB has lowered the Discount rate to 1.25 %. So in fact this is artificially low. And it fits the last moves of a Fiat-Money system. So Germany does not have a problem refinancing itself with bonds. But it gets more expensive for the other on a daily base. Monti or not Italy is "finished". But now the EU bureaucrats are again entering the scene. Baroso warns of a systemic crisis (he is right on that) and he wants no actions and now the madness shines. A new round of credit and leverage of EFSF should do the work. JFYI the EFSF has to offer much more interest then Germany alone, but the credibility of Italy, France, Belgium etc is (not free but) falling. So there are two options I think the deledefs will take. At first the will put more pressure on the ECB to buy even more bonds (this would be another new round of expropriation). The other thing will be that they introduce a tax names something like "stabilization of the euro fond" or the like. Taxes are not a gift they are robbery and so you can see in both paths a new round of expropriation starts.

But there is another "secret" round, with no democratic control and even worse. The ECB has bought bonds from Greece, is now buying bonds from Greece and Italy. (it's not known to me yet if France bonds are bought also) but the ECB has to be financed from every Euro country. And well Germany bears 27% or so of the "financial needs" and well the bonds will get worthless sooner or later. I guess sooner is not a bad guess these days. Why is this even worse than EFSF, well the ECB works without any control. An extension to the EFSF is not very likely any more. But the obligations from the ECB must be beard. This means whatever the ECB does everyone has to pay for it (dearly) . So the way seems very clear to me. The pressure on the ECB will raise they will claims kind of emergency laws. And down we go.

I just invite you to check this blog for the past years and you'll see how I warned about it over and over again. Just see http://mises.org/Community/blogs/fdominicus/archive/2011/02/03/my-predictions.aspx on my outside Mises blog I wrote (more than 2 years ago http://fdominicus.blogspot.com/2009/10/done-i-sold-last-asset-from-country.html You can check the Mises blog and see they warned and warned and warned. But the delebets do not give in the name expresses what they are.

Intermediate status

Friedrich Dominicus — Fri, 13 May 2011 16:54:00 GMT

Of Inflation up to 3.1 % in the US and 2.4% in EURo land

Does not need much more to get over 4%. If that is reached you money will half it's value in just 18 years. And still the Fed is printing money as mad. So maybe 5% is not that far away.

And again "this time isn't different". The deledefs are making debts as much as they can. And the only question is not IF debt must be just. How much do I have to pay for the debts. And the stealing goes on. They get the money first and profit from non risen prices and then people realize that they got poorer day-by-day. They'll try to get higher wages and the spiral steepens.

I've my opinion of what to do against this gangsters. I suggest you check raw materials, precious metals and land. Maybe the prices are coming down and you can make a deal. But be aware. If you will have something after this ponzi scheme tumbles down. You will have to pay for the new start. So you do not just pay one buy twice, thrice....

Reputation of the Fed

Friedrich Dominicus — Fri, 29 Apr 2011 04:35:00 GMT

Well I just can conclude it sinks faster than ever for me.

Now they want to stick to their program of printing money. And well if you have savings you got robbed day by day, monthy by month year by year. The inflation raises (just remember: http://mises.org/Community/blogs/fdominicus/archive/2011/02/03/my-predictions.aspx. And more an more of them are getting real

We're not yet in the common over 4% inflation rate, but just in a few areas. The politicians start blaming whomever for "unfairness". Especially unfair are those more successfull ones. Subsedies are paid but do not yield the proper cash-flow. And the large corporations do whatever they can to not pay taxes (I wished everyone could afford the tax specialists of this corporations). And so the government does not get any earnings and starts printing money. With the "circle of "money"". The government issues bonds, the feds buys this bonds and the new money is spend in anything having some worse. Inflation raises and so on.

I doubt that ever in history a failure of a world champion has happened in such short time. In just 3 years the USA turns from a free system in a government controlled nightmare. They overextend their means and are now paying dearly, but currently the deledefs lovers "gain". And I'd not be suprised to see more of them buying land. I bet they are preparing for the after-crash. And then they will claim themselves to be the "true" americans. The question is are thieves the "true" americans or aren't they?

Maybe not all is lost at least some states remember what value means. And maybe this will save them. We just have to wait and see what the bureaucrats in washington and everywhere will do....

My predictions

Friedrich Dominicus — Fri, 04 Feb 2011 05:21:00 GMT

just to keep that written down. I know no deledef will read it and no-one will agree. But be it as is. The path is crystal clear IMHO.

I wrote yesterday about inflation. And there's a clear evidence for it that prices start running (if they start cantering, everything will go down the drain). The central banks do not do anything against it currently. It was highest time to make money lending more expensive around 1-2 years ago. The central banks did the opposite. They made money cheaper than cheap. Fact is with daily deposits you're loosing money. So I predict a raise of the inflation in EU country at or around 4-5 % in the next 5 years, the same will hold for the US. (1st Prediction)

Bonds have risen extremely. It will not be possible to make money even more cheaper. It could be that it will be demanded that the rich buy worthless bonds from the diverse countries, but this will not happen really soon. So I predict that bonds will not raise much more, instead I predict bonds will start falling within the next 2-3 years. (2 nd Prediction)

Because of the massive liquidity overhang, prices of all commodities will raise beyond reasonable limits. So we'll see the development of new bubbles. (3 rd Prediction). I think the prices will start raising this years.

Because of the massive amounts of debt in the developed countries. I expect cuttings in areas like investing in infrastructure and everything where there is no law to "back" up the claims. Now the services will be needed still so towns, lands, countries will start raising their prices also. I expect higher prices for water, sewage, waste, street cleaning, Kindergarten you can put in here anything that is "provided" by elected "authorities". (4 th prediction) (within the next decade)

Saving in the deledefs meaning always has meant or means, raising taxes. And so I predict raising taxes also (5 th prediction) (within the next decade)

Because people will try to avoid being taxes more heavily. The money will start flowing toward low level tax countries. This is a serious threat to any Deledef and so I expect that they will discuss and hindering free trade and free money flow. There will probably be extra taxes if you start bringing you money outside of your home country. I even could imagine that they introduce "artificial" exchange rates. Just to save the "poor" defrauders, because they will name it "unfair". (6 th prediction)

There is but one thing (I'm just wishing for) which could change things considerably. This would be the end of the Fiat-money fractional reserve system... I predict for the country breaking this taboo, will prosper beyond any imagination. Some countries currently have this chance, I bet they will not see it and do the same mistakes we've done with your federal banks. I do not expect it in the EU nor US. This countries still have no clue about "earning" money any more. The sums mentioned in the area investment banking etc, have not "foundation", but they have much influence and you see what happens if the do wrong. The countries will fail them out. And the politicians do profit massively from this...

This leads to my last prediction. We will hear more often the Phrase (it's as all just a word we have for that in German "alternativlos" (you can roughly translate it as "we have no choice", unparalleled, the one and only choice) . If it comes to more control they will probably not name it as such. It will be "laws against speculation", "program-to-enhance-competion", "law-for-equal-opportunities" or such but in fact it means. "We are right, you have to comply or we bring you to jail! (7 th Prediction)

Disappropriation starts

Friedrich Dominicus — Tue, 01 Feb 2011 05:52:00 GMT

In the EU zone the inflation rate is beyond official 2%. That means in 36 years the value of your money is halved. However this is just the official rate which always is lower than the real one. They write about a "felt" inflation of 5%. The truth will be in between. So let's assume it's 3.5 % So in around 20 years the value of your money is halved. So currently the Deutsche Bank offers you 2 % for one-year-deposits. You've to pay 25% taxes on it so there are 1.5% left. The inflation rate is 3.5% so you loose 2 % of your money in just one year.... I wrote about it more than once, inflation is government sanctions stealing. Now here we go. Germany has officially 1.7 trillion of debt (this is another big lie) because there is not money saved or other promises (like e.g the pension payments). You can bet how "bad" government feels about inflation. They will always say "it is terrible" but reality it makes them "smile". Probably a kind of cruel smile, or simply nasty. The kind of smile you can see if a theft has get along with the valuables of others. They smile because with more inflation there debts are de-evaluated also. And so they can steal some other money without the need to stick to their theft. It's the "circumstances" or even better the stags, and that of course is another reason to extend the "control" Don't you dare to smile you US citizens, you are even worse of. Your paper money has raised over 100% in 2 years. You will get your share of inflation also. And then it's your "establishment" which will start to grin...

to bubble or not to bubble?

Friedrich Dominicus — Wed, 29 Dec 2010 06:24:00 GMT

this is the question. The Dax is up around 1000 points that are roughly 16,67 %, let's see what the Dow has done: up around 1000 points also that are roughly 9.6%. Well let's see Gold: roughly up 300 EUR from 750 EUR beginning of the year, that are gains of around 40%. Now is Gold a Bubble? Well it very depends on your point of view. Unfortunately neither the FED nor the EZB, show us a graph of the money expansion and so we must deduct it from second sources: http://www.goldreporter.de/wachstumssprung-bei-geldmenge-m3/news/545/ states that M3 grows was beyond 13% in 2004!!. So with all the buying of bonds, one can assume that M3 has grown beyond that limit in 2010. So we never will know really. How much money was generated out of the blue during the last three years and what's the development of the prices. It could be that gold is a bubble, but it seems more likely that money was bubbled much more. So if we just assume a growth of 8% of M3 in 2009, and 2010. We should have seen a raise in the BIP of at least that much. This has not happened, and so the question persists where was this money spend? It seems very likely the distrust to paper-money has driven many people to buy sliver, gold, platinum.

Now we can bet on the next years. There is not strengthening of money policy in view. Bernanke just wanted to buy another few bonds at or around 600 Billions. in the EU the discussion is on to introduce "Euro bonds". That are bonds backed up by the EU, backed up by different countries. This suggests that money supply will be plenty the forthcoming future. So I'd think we see another raise in all kinds of assets. (real ones not that funny junk bonds of any EU country or the US).

Where will this bubble end? Well we have learned in 2008 that there is no one-way street to higher prices. And we all know that even the sky has it's limits. So either the central banks start contracting money or the bubble will burst with a loud bang. I'M very pessimistic that the central banks start acting responsible. I bet they fill follow the lead of the Japanese central bank and government, which now try for more than 10 years printing out there way of their recession. The result is that Japan has the highest rate of debts of all developed countries. And still it does not work. No-one is surprised but the Deledefs and it seem they believe the only way out of debt is collecting more debt..

Well this will not work and if the money bubble will burst, you hopefully have something of real value to trade or pay with. Gold is but one instrument. So I expect an extra raise of the gold price. And I expect it to inflate even stronger the more the central banks try to print us out of this crisis. If the gold prices starts cantering, all bets are off.

I really am curious which country first will draw the correct conclusions. The country which will end this fiat-money madness, will gain everything, people, money wealth. All others will end in misery and this misery has meant war in the past....

There's just one thing left.

Friedrich Dominicus — Wed, 02 Jun 2010 05:15:00 GMT

Which will stop the deldedefs to ruin us completey. We have to take away the possiblities to mess up with money. So it all ends in, we need to have a stable money. We have to get rid of the central banks. The problems with the current state of affairs just show it over and over and over and over again. Just read the coments of Bernanke or Trichet, the most prominent examples of the heads of central banks. Just remember the 700 billion TARP money? Just see the 750 billon money for the "european (un) safety net". Fact is: The leading countrie are drowning into debts. Expecting that they will pay for it is just "wishful-thinking". They claim they will start saving, but this is a lie. So what they will do is inflate the money. This will still from those having savings, but that is the way it has gone since the 2nd world war. Just look back into the 1970 ies. With their extremly high inflation rates. That we currently do not see the inflation rate rising is just "by chance", with all the new money printed they will start raising. And then imagine central banks which will claim stabiity is reached as long as inflation rates stay below let's say 10 %. Just let them keep this for 7 years and the value of the debts just have halved.... But if they try to steer back they have to raise the short-termed interest rate, this will get a very very very harsh stop.... I'd prefer not to try this route, so I'm for. Stop the central banks, let's work for "stable" and valuable money.