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Inflation – Black Swan

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  • #12455
    dave jay
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    • Total Posts 3386

    I was reading the other day ..

    Nassim Nicholas Taleb yesterday warned of the inflation threat, Cameron conceded the possibility of a British debt crisis. Guido thinks it highly unlikely Britain would ever default on it’s debt so long as it has a sovereign currency – we would just devalue and pay foreigners in devalued pounds. Though Britain could have, as Cameron said, foreign investors demanding higher risk premia, higher yields. That could see mortgage rates above 10% again – both here and in the U.S.

    Warren Buffet yesterday was quoting John Maynard Keynes’ road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

    .. should we pay attention when these people make predictions like this or should they be ignored. They are basically telling us that the US/UK government are lying and we are about to be shafted with inflation, deliberately.

    #245224
    Kifill
    Participant
    • Total Posts 146

    Taleb is a nutter. Cameron will say anything that makes him appear responsible and the Labour Party appear inept. Buffett is probably worth listening to. The UK government lies to us a lot of the time, but I doubt has the competence to impoverish its own population deliberately. Maybe we should worry about it, and maybe we shouldn’t, I guess…

    #245227
    wit
    Participant
    • Total Posts 2165

    dave,

    this is hardly "black swan" stuff – more in the line of Basil’s "bleedin’ obvious".

    US and the EU are in debt, deficit and denial. Remember the Euro stability pact which said that the budget deficit could not exceed 3 per cent of GDP in any Euro-zone state? It now is double that in the best performing states, and triple it in the worst, at 10 or 11 per cent. UK as bad, even US on track to hit 13 per cent.

    But not a peep from any US or Uk or EU politicians about how or when it will be fixed.

    They all put on the show of problem over because they figure its electoral suicide to tell it as it is. Inflation is the least bad option for them – try telling folk they have to take a cut in the amount of their wage packet; better to let its buying power depreciate. Also, inflation means they take in taxes a bigger proportion of your real spending power.

    They’re all going to pay off their deficits/ borrowings through a combination of a) borrowing more and b) printing more money.

    The consequences have already been a tailspin in the bond markets, pushing up interest rates, and increasing commodity prices.

    The folk with the cash, the commodities and the prospects for growth are mainly in Asia. In Europe, mainly Russia and maybe Norway – the resource-rich.

    IMO the way to go fundamentally is to get out of sterling / euro / usd, and put it into whatever you figure the growing markets of the world will be after.

    best regards

    wit

    #245258
    Drone
    Participant
    • Total Posts 5616

    .. should we pay attention when these people make predictions like this or should they be ignored. They are basically telling us that the US/UK government are lying and we are about to be shafted with inflation, deliberately.

    Taleb, Buffet, Soros and their ilk are just successful punters specialising in their chosen market who – to quote a certain TRFer – have gone ‘against the crowd’ and reaped their rewards. So I’m prepared to pay a little more attention to their words than those of government officials and sundry salaried financial ‘experts’ who are either intent on saving their skins by economising the truth or are incapable of formulating novel ideas by the use of just a teensy-weensy bit of lateral thought.

    No one’s words are gospel though.

    #245270
    Cav
    Participant
    • Total Posts 4825

    Keep an eye on the employment/unemployment figures, consumer confidence and read The Economist regularly.

    Stay away from blokes in suits telling you what to do with your money. Never listen to any Economist employed by a government or commercial financial organisation.

    Consumer confidence in Western Europe fell sharply in late 2008 and early 2009, reaching record lows in certain countries, including the UK. Confidence is declining as a result of the global economic slowdown, rising job losses and a realisation that the downturn will be more severe than initially believed. Although sentiment varies around the region, it is contributing to lower spending, popular dissatisfaction and negative business sentiment, which threatens more business failures and job losses throughout 2009-2010.

    #245301
    dave jay
    Member
    • Total Posts 3386

    I think it is Black Swan material, more of a manufactured one than we have seen in the past .. the talk is a fear of deflation and economic collapse when in fact the real pressure in the economy is inflation.

    A fair point from wit regarding the 13% deficit and the ominous silence of how it will be all paid off .. inflation and interest rates of 10%+ would sort it.

    #245816
    Grimes
    Participant
    • Total Posts 1889

    I don’t want to alarm you, Dave, but at least you’ll get a laugh from the first paragraph of this satirical diatribe:

    http://kunstler.com/blog/2009/08/financ … .html#more

    #245990
    dave jay
    Member
    • Total Posts 3386

    Nice one Grimes .. :D

    #246005
    Grasshopper
    Participant
    • Total Posts 2316

    Top link, Grimes. :mrgreen:

    #246223
    Grimes
    Participant
    • Total Posts 1889

    Glad you liked it, lads.

    I think I gave a link to Orlov another priceless commentator on the way our current plight looks like panning out; the earlier articles are the most fascinating. He has some amusing comments about your local, borderline-psychotic, American policeman, you want to cultivate/bribe.

    I’m pretty sure I posted the links to the Silver Bear cafe site in Argentina. Utterly dire, but, of course, made so much worse by the prior history of fascist regimes throughout South America, with the extreme polarisation of wealth.

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