INFLATION – DEFLATION
I listened to the debate between Rick Ackerman and Mike Shedlock on the Kereport today and I wanted to comment on the inflation side. We have a perfect example of two analysts locked into the deflationary crash scenario by what happened in 2009. Both are deflationists and both have been wrong all year long, and basically wrong since the bottom in 2009.
I’ll say it again: In a purely fiat system there is no level of debt that can’t be inflated away. We proved that in the 70’s when we inflated away the Vietnam war debt.
Let me paint a picture for you. Let’s say you have a printing press in your basement and have unlimited access to ink and paper. Explain to me how you can ever get so deeply in debt that you can’t fix the problem by simply walking downstairs and firing up the press.
Essentially that is what the government does, and they don’t even require any paper or ink. The money is created with a keystroke.
In this environment deflation is a myth and it’s why these guys have been wrong for years. They simply refuse to walk down the stairs and see the printing press for themselves.
In a purely fiat monetary system deflation is a choice not an inevitability. If a country is willing to sacrifice its currency then any amount of debt can be inflated away. It doesn’t matter how many trillions we are talking about. At any point in time the government can simply mail checks to its citizens. Never happen you say? For all practical purposes that’s exactly what we did in the spring and summer of 2008 with the rebate checks.
Mike says that stocks are in a bubble. I had to laugh when I heard that. A bubble is characterized by price stretching 50 -100% above the 200 day moving average and rising at least 100% in a year or less. It is also characterized by mass participation by the public.
Have any of those things happened in the stock market yet?
No, we aren’t even vaguely close to that yet. It will definitely happen sometime in the future, but not for several years yet.
For the last year I’ve been warning that the bubble phase was coming. It won’t happen overnight. Bubbles start slowly and build steam until the final year when things go parabolic. Just like I was the only one who spotted the baby bull in gold, I’m the only one who is warning that we are in the baby bull stage of the next bubble phase that is likely to last at least 3-5 years. in the stock markets.
I’ve watched as many analysts said I was crazy. Stocks were heading into a bear market they said. Well, here we are only 4 points from new all-time highs. Who’s crazy now. Me who predicted this a year ago, or the same analysts that continue to predict the next crash is just right around the corner?
Folks, it just doesn’t pay to bet on the end of the world. It can only happen once.
Meanwhile, the vast majority of analysts are just like Rick and Mike, trapped in the memory of 2009 and expecting deflation. Unfortunately they’ve been wrong all year and they will continue to be wrong. We aren’t going to get deflation anytime soon. The deflation will only come after the next series of bubbles pop. We are at the very beginning of a massive inflation and my subscribers have been making obscene profits this year because I correctly identified the inflationary trend developing instead of waiting for the sky to fall.
Folks, you have to quit listening to the deflationists, as they are going to cost you dearly in the years ahead. If you agree with what I said in the third paragraph about the power of the printing press, then you need to start buying stuff, almost any stuff, because everything is going up in the years ahead.
As I’ve been saying for over a year, EVERYTHING is going up together. All that printed money has to land on something, and the normal path is for it to land on everything.
I’ll finish by showing you one chart – the chart of the Nasdaq. The bigger the consolidation the bigger the rally once a breakout occurs. You are looking at a gigantic 15 year consolidation. When this breaks out there is simply no telling how far it will go. There are literally trillions and trillions of inflationary currency units available to drive this higher. I’m going to take a guess and say a bare minimum target over the next 4-5 years is 20,000 and I’m probably underestimating.
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here are some points for bulls:
> post-Brexit non-issue
> weak euro banks non-issue
> TLT 2-10 year rates non-issue
>NFP rates non-issue
> lousy earnings and high valuations non-issue
all that matters are the printing presses and
fundamentals out the window.
in short, buy, buy, buy!!
Exactly what I’ve been trying to tell traders. The one fundamental of global QE overwhelms all other supposed fundamentals that other analysts seem determined to focus on.
If your saying they can just print forever then what will be the cause of a crash/bear market at the end of the bubble phase?
Also do you feel gold will pullback to a DCL soon? I’m thinking 1300 is possible by August.
That one is easy and we have a classic example in 2008. When a bubble forms and pops then it’s impossible to print more money and reflate the bubble. The liquidity simply won’t flow into that sector. It finds something else to flow into.
In 2007 and 2008 the Fed tried to print and stop the housing bubble from imploding and keep the stock market inflated. Instead the money flowed into the commodity sector causing a massive inflationary shock that collapsed the global economy.
Weekly buy signal on NAS BP indicator. This is a big deal.
“Mike says that stocks are in a bubble. I had to laugh when I heard that. A bubble is characterized by price stretching 50 -100% above the 200 day moving average and rising at least 100% in a year or less. It is also characterized by mass participation by the public.”
Not to forget that the P/E ratio’s can get way higher than now. Especially since the bond yield are superlow. These bear clowns at Zero Hedge always talk about that the P/E ratio is too high, well it’s simply not true.
You have been hitting it out of the park the last year or more, Gary. I listened to you and no longer try to short the stock market. It is kind of unfair that Avi and some other analysts are constantly trying to ridicule you when your record as of late has been stellar.
Amen!
At this point they just look foolish. Everything I predicted has played out exactly as I said, and the bears have been proven wrong.
Why would anyone even bother to listen to them anymore?
weaken the us dollar then the translation gains from overseas delivers the earnings boost to expand the pe multiple..
similar to what the BOJ did to the yen and then Nikkei went on steroid. when USD turns south and breaks down gives a boost to all assets.
like Gary pointedly out.. biotech and NASDAQ, here we come ~
Gary,
can you please give us a chart on the dollar soon.
Thx
I’m waiting for a sign that the daily cycle is rolling over.
cycle studies is so cool. thanks Gary.
Gary,
I beg to differ. It is a deflation environment we are currently in. When you have negative rates in Europe and Japan this tells you that the velocity of money is not expanding as fast as we need to sustain the economy. People are not spending money and the banks are not lending out money. The negative rates are a tell tale sign that we are in trouble. Big Corp Companies are hoarding money not spending it and are actually buying back their stock. That means they are not investing for the future. Another tell tale sign. We will have deflation first as the US$ goes much higher and once the US$ starts to crash then inflation.
That’s been the theory for 7 years and it’s been wrong.
The reason rates are negative is because every central bank is printing money and buying bonds.
We’ve had massive inflation during this time when the so called velocity of money was falling. It has mostly manifested in global stock markets. Now it is going to manifest in everything as the manipulation of the gold market has ended.
I’m not sure why anyone even pays any attention to the velocity of money. It is a worthless concept. Velocity has supposedly been collapsing since 98, and yet in that time we’ve had a tech bubble, a housing bubble, a commodity bubble, a bond bubble, and now one of the strongest bull markets in history.
The dollar is not going higher. It can’t even rally back above the 200 day moving average on a monster jobs report. The dollar topped at 100 and is now starting the next bear market.
Gary,
I can compare the period we are in to the late 1920’s. We are in 1927 if I can say. The Bond market is at a peak meaning interest rates have hit bottom or close. Money will start to flee Europe, Japan and the developing countries including China and come into America the last leg standing. Money leaving the Bond market as interest rates start to rise will go into the stock market and gold. Money coming from foreign countries will drive up the US$ plus fuel a further rise in the stock market. This is what happened in the late 1920’s and then we had 1929 top and then crashed and burned. We are closely repeating this cycle. I believe that the US$ bottomed in a wave 4 move down, of a 5 wave up move, that ended in May and we are on the first wave up of the fifth and final wave. I posted that cup and handle chart in the other forum. I believe this is what will transpire in the near future. I enjoy the discussion and appreciate your take on this.
I’ll put my money on cycles over nonsense EW any day.
The cycle count has the dollar making a major multi-year cycle low in mid 2017 and its already generated two failed intermediate cycles indicating the decline has already begun.
“Folks, it just doesn’t pay to bet on the end of the world. It can only happen once.”
Lol, I’ll be posting this one on FB.
Exactly. Friday is the nail in the coffin for dollar. When something is suppose to go up and din, it’s going down.
Conversely, when something is suppose to go down, and doesn’t, it’s going up. Brexit , stock market couldn’t stay down. That’s the nail in the coffin for bears. Please short more