Smart money, very smart money and mortgage rates

Posted on June 11, 2009 by stacyherbert| 42 Comments

Stacy Summary:  Hyperinflation.  Rick Ackerman, who is a deflationist, mentions hyperinflation in the interview we did with him that airs tomorrow.  Marc Faber, who has been spot on with his forecast every step of the way in this crisis, has only recently predicted hyperinflation based on the policies being enacted.  What is your forecast??

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42 Responses to Smart money, very smart money and mortgage rates

  2. Neuf cube | June 11, 2009 at 10:11 am |

    Cheers Stacy, hope all well on the Descartes terrace, nice to see some sun back today in Paname after a week of flotte. Interested in whether there are clearer ways to plot some of this oil speculation racket that’s been ratcheted up again. Keep up the good work,
    93

  4. Phil | June 11, 2009 at 9:10 am |

    @Scott … LOL , great Vid !

    The 2012 Pelosi GTxi SS/RT Sport Edition

    From : Congressional Motors
    Designed by : Barney Frank

    Remember that song : “Back to the USSA” ?
    Germany could have sold you their DDR instead of paying 1 Trio. Euros for it !

    LOL!

  5. Brandon | June 11, 2009 at 8:49 am |

    We will have inflation. I look for oil to hit $300 a barrell in the next few years, I think gold will hit $2,000 and Silver will hit $50.

  7. Ingvend Storrs | June 11, 2009 at 8:22 am |

    Marc Faber has only recently predicted hyper-inflation? Really? Hmm… .

  8. Danny | June 11, 2009 at 7:38 am |

    @ scott from oregen

    don’t sell yourself shot ‘humble carpenter’ i bet you know more than you think. What your essentially talking about there is stagflation i think, inflation with growing unemployment. I dunno mate, the inflation/deflation debate can run ’til the cows come home– both are very bad any way you cut it

  9. Scott from Oregon | June 11, 2009 at 7:30 am |

    I’m a carpenter so all of this deflation/inflation stuff almost goes completely over my head.

    I saw Peter Schiff tell a woman that “inflation” is simply an increase in the availability of money”.

    OK. By that definition, with money being poured into the raging fires, I say, yes. We will have inflation.

    The question is, where and what will inflate?

    Think of an old inner tube full of weakened rubber… Where will it bulge when you add lots of air and pressure?

    Who knows?

    But you know IT WILL BUBBLE somewhere…

    The way I understand it, rising prices are a consequence OF inflation, but are not necessary to have inflation.

    It seems to me, you can have inflation and contracting prices at the same time, which is my humble prediction…

  10. Don | June 11, 2009 at 6:58 am |

    @Danny
    nice video it is how I feel often!

  11. Don | June 11, 2009 at 6:50 am |

    @Stacy and All the good people…

    I shun to forecast anything now, lest it be realized as my own self-fulfilling prophecy. Or if I am accurate and nothing to do with it myself, I might go mad!

    I have to scratch my head at times, perhaps it’s the traces of fluoride, MSG and other toxins; and ask myself “is all this shit really real, or am I o the wrong side of reality again???” Like a ‘Bad Trip’ moment.

  12. stacyherbert | June 11, 2009 at 5:52 am |

    @Neuf cube – I think the fact that nearly every single super tanker is being used to store this oil offshore points to speculation. Mind you, it isn’t that much of a speculation if you can buy it at under $30 as they were doing in February and then selling it at double that for delivery in November. Even with the storage costs, they were still locking in profits. Now, the interesting thing will be to see whether or not it crashes when all this supply comes online.

  13. Neuf cube | June 11, 2009 at 5:46 am |

    @Jouri, Hi, silly question perhaps, but is there any way to measure/gauge the amount of contango-type trading in oil you mention, or is just speculation based on price hikes and market insinuation?
    Cheers,
    93

  15. Phil | June 11, 2009 at 5:43 am |

    Jim Rogers giving CNBC guests a lesson in capitalism and economics .

    One of my favourites from Aug. 2008 …
    … he obviously made a small fortune shorting the investment banks he mentioned .
    ;-)

    Jim Rogers on CNBC: ABOLISH THE FEDERAL RESERVE!

    http://www.youtube.com/watch?v=Wnmo41TbK_Q

    I love guys like Jim with so much common sense !

  16. Adam Gibson | June 11, 2009 at 5:31 am |

    Have you seen this incredible story about the Japanese in Italy with $130 billion in counterfeit bonds?!

  17. pj | June 11, 2009 at 5:30 am |

    Two excellent posts! We need to hear more about deflation, the real enemy that Japan is still trying to defeat 20 years later. Looking forward to watching your interview with Rick Ackerman. You and Stacy are doing a great job keeping us all informed!

  18. Bill Stewart | June 11, 2009 at 5:23 am |

    It would appear that civilization in some parts of Detroit has totally collapsed

    http://www.youtube.com/watch?v=HuFBdjdhBVg

    and the Detroit CBD has become totally depopulated

    http://www.youtube.com/watch?v=0JbGxIR8JTk

    I can only assume that headhunting and cannibalism will soon be defacto in this area …

  19. Phil | June 11, 2009 at 5:19 am |

    Catherine Austin-Fitts Blog :

    …. The wording would appear to reduce Britain’s Financial Services Authority (FSA) to a subservient arm of the EU apparatus, limited to “daily oversight” ….
    ….
    …. There is widespread suspicion that Paris and its allies have seized on the financial crisis to rein in Anglo-Saxon capitalism and impose their Colbertiste ideology on the City. ….
    ….
    …. While Berlin favours tougher rules than the FSA’s “light touch” model, both the Bundesbank and the regulator BaFin are jealous of their own oversight powers….

    http://www.telegraph.co.uk/finance/economics/5488163/Britain-isolated-as-EU-tightens-grip-on-City.html

    Interesting insights indeed !
    A (French) Coup d’etat ?
    ;-)

  21. MyGoldPrediction | June 11, 2009 at 4:52 am |

    @phil definitely I think the US is pushing european banks to show weakness to prop up the dollar.

    It’s an all or nothing gamble the US is in and its financial warfare..If everybody by now understands how finances and war are related, the war logically starts in the banks..

  22. Phil | June 11, 2009 at 4:48 am |

    ECB fears bank crisis in 2010 as recession drags on
    The European Central Bank is paying close attention to mounting difficulties at 25 banks deemed crucial to the health of the eurozone financial system, fearing another wave of bank turmoil next year if the recession drags on.

    By Ambrose Evans-Pritchard, International Business Editor
    Published: 9:57PM BST 10 Jun 2009

    ** Ambrose Evans-Pritchard **
    http://www.telegraph.co.uk/finance/economics/5498989/ECB-fears-bank-crisis-in-2010-as-recession-drags-on.html

    Thanks Ambrose !
    ;-)

    The Daily Telegraph is owned by the Barclay brothers.
    In 1993, the Barclay brothers bought the island of Brecqhou, one of the Channel Islands, located just west of Sark.
    http://en.wikipedia.org/wiki/Barclay_brothers

  23. Phil | June 11, 2009 at 4:40 am |

    Dollar’s Reserve Status May Deteriorate, Roubini Says (Update1)
    http://www.bloomberg.com/apps/news?pid=20601103&sid=a9PLmUfhX3v0

    …
    June 11 (Bloomberg) — The dollar’s status as the world economy’s sole reserve currency may deteriorate, said Nouriel Roubini, the New York University economics professor who predicted the financial crisis.

    “We may see complementary reserve currencies,” Roubini said at a conference today in Athens. While it’s “not going to happen overnight,” the development “will diminish the role of the dollar over time.”
    …

  24. Danny | June 11, 2009 at 4:40 am |

    @ Phil

    Re: Fed and PR

    Yeah i saw that. They hired some hot-shot rottweiler in a fancy suit to spout PR (propaganda) against Ron Paul’s HR 1207 bill to audit the FED. Expect dirty tricks…

  25. Phil | June 11, 2009 at 4:35 am |

    @Richard … ” Chinese Construction Bank / Cayman Banks”

    Yep .. I noticed that CCB “opening in NY” as well .

    As to Cayman Banks , it was funny when the US attacked Switzerland, after all, the Cayman idea was created by the CIA years ago as a Wash-Fund centre AFAIK.
    … and didn’t the recent BearStearns fiasco start there ( closed 2 HFs ) ?
    Also, IIRC, didn’t Paulson start offloading dubious US (bad)assets to Bermuda LLCs just after the BSC crisis .. mentioned by Denninger IIRC !

    I have to wonder if there isn’t a sort of financial war going on “between” the US and European Banksters to win “final” control … notice the continual dissing of the Eurozone as being “in greater danger than the US” ( Thx to GS and others ) …especially to support US Bonds .. as “the only safe haven ” ..LOL !
    ;-)

    I remember the days when Denninger was “trying to make sense” of “our financial system”. Looks like he’s close to giving up .

    BTW… Did anybody notice the article a few days ago that the FED will now spend money on PR .. to improve it’s image ?

  26. niphtrique | June 11, 2009 at 4:32 am |

    A solution to the crisis is simple, if one identifies the root cause. However economists ignore the obvious.

    If someone brought a 1/10 oz gold coin to the bank in the year 1 AD, and the money remained there until the year 2000 AD, collecting a yearly interest of 4%, the amount of gold in the account would have been 3.6 * 10^31 kilograms of gold. This is 1.9 * 10^27 cubic metres of gold weighing 317 times the complete mass of the Earth. This simple example makes clear that interest on money is unsustainable and leads to crisis.

    Credit and interest on money make it possible for an economy to grow above potential during a boom phase. In the boom phase investors add leverage using credit which further intensifies the boom, creating shortages of materials and labour resulting in rising prices. Interest on money entices banks to lend money to leveraged investors during the boom phase. Credit makes it possible to create money out of thin air, which further enables the banks to fuel the boom. When the cycle turns into bust, investors start to deleverage, which further intensifies the bust, creating surplusses of materials and labour resulting in falling prices. What economists do not see, is that credit and interest on money are the root causes of economic booms and busts.

    It is possible to create a far more efficient economic system with constant economic growth and without crisis, unemployment or government intervention. See:
    http://www.naturalmoney.org/introduction.html

  27. Richard@lattitude30N | June 11, 2009 at 3:43 am |

    @Phil: JIMHO FWIW–Well yes as long as the financial wizards continue to pull the wool over all of our eyes and the CDS and derivatives market remains unchecked….to move that entire $600 tr ( or is it $1200 tr ??) value of this “elephant” through the “snake” of our financial universe and daily economy will take at least a decade or two…we are so far in the beginning throws of this fiat based debacle that when the “real” troubles arise it will make our collective heads spin…As this weeks US Treasury auctions come to a close today and as the rates seem to all be advancing…One has to wonder when the cycle ends in September what the going rate(s) of return might be to further attract the buyers? Clearly 30 year fixed mortgage rates ( 5.75%???) are advancing to a point when they no longer seem attractive–a 4.75% rate sustained for a decade might help–but after all the common home buyer is being left out in the cold to freeze, or is it ‘to dry’ …Is it a total surprise that the Chinese Construction Bank just opened it’s first office in NYC? One has to wonder what potential American baubles of wealth are in it’s sights? Clearly all the major US banking houses have mostly shut their doors to new lines of credit to the American citizenry. With the continuation of support for the “man who brought us to this dance” and his kin: The Hedge Funds and the Offfshore banking houses, all wealth is steadily being concentrated in fewer and fewer hands.This is untenable in the short run as well as the long run…( if I am not incorrect the offshore Cayman Banks have the authority to leverage booked assets 8X face value-so why would they want to end this boondoggle??)…As for the oil…IMHO ( H is for ‘humble’ ) the below $70 a barrel price was starting to be a burden on too of the oil producing nations ( the Saudi’s and Russia for example ).. enuf disgust for now, Richard@lattitude30N

  28. Phil | June 11, 2009 at 3:29 am |

    UPDATE on those Bonds found in Italy

    Mob Tried to Bilk HSBC, Bank of America, Italy Says (Update2)
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aYn0KFaH8IX8

    … ” By Steve Scherer

    May 22 (Bloomberg) — Italian prosecutors today broke up an international ring led by the Sicilian Mafia that tried to use fake Venezuelan bonds to obtain credit lines totaling $2.2 billion from HSBC Holdings Plc, Bank of America Corp. and unidentified British banks, according to an arrest warrant. “….

    Prosecutors say mob tried to bilk Bank of America, other banks
    http://www.app.com/article/20090522/BUSINESS/90522026/1003/Prosecutors+say+mob+tried+to+bilk+Bank+of+America++other+banks

  29. Phil | June 11, 2009 at 3:22 am |

    California : ” The greatest threat to our state is Government ”

    14 minutes…

    Fault Lines – California: Failed State – 11 June 09 – Part 1
    http://www.youtube.com/watch?v=jajziX0dHzc

    9 minutes…

    Fault Lines – California: Failed State – 11 June 09 – Part 2
    http://www.youtube.com/watch?v=p7bCSziEjTM&feature=channel

    BTW .. Thx Danny for those links.

  31. Nick, Dublin | June 11, 2009 at 3:11 am |

    Awkward photo as Gaddafi meets Berlusconi.

    http://www.guardian.co.uk/world/2009/jun/10/gaddafi-visit-italy-berlusconi

    * Wouldnt Silvio just love to have 40 female bodyguards.

  32. snoop diddy | June 11, 2009 at 2:45 am |

    I think the policy nowadays is to enslave Eastern Europe with USD debt through the IMF. It’s ironic that China didn’t take IMF loans but is now holding too much US debt. the USD as a global standard makes fools out of us all.

  33. Youri Carma | June 11, 2009 at 2:40 am |

    Bigger question is when the (hyper)inflation will take root? The economy is still in decline now, more unemployment, less export and a banking system that isn’t deleveraged and which has no control anymore over the long term interest rates. Big question is where and how demand can grow in such economical destruction? For hyperinflation you need a positive Multiplier which I don’t see coming soon.

    Economical growth will be very difficult first of all becasuse of the inflation danger. Secondly cause of the extremely volatile market where traders push prices up to fast so that economical growth gets beaten down. You see that already now with the crazy oil prices. A economy in full decline and still rising oil is a lot of bs from traders on the future market, contango playing with oil storages to make an easy buck. This kinda market behavior will be seen often in the future and will block fast recovery.

    If the economy finds room to get some speed inflation will spoil that party immediately so declining dollar, higher longer term interest rates, high budget deficits, countries moving away from the dollar this gonna be a hell of a ride trough the economical minefields for any growth will take place. Especially when commodities are getting more expensive also for the same trading reasons on the financial markets which again have nothing to do with the real demand but more with expectations and gamblin.

    And where do people go when leaving the dollar? The Yen, the Yuan, Australian dollar? If people gonna tank in other currencies the dollar will get an other beatin.

    If all the things mentioned above will go parallel than we will get the situation described by Bob Chapman: “”Just bend over and kiss your butt goodbye.”

  34. BW | June 11, 2009 at 2:21 am |

    The US dollar’s only mission is to conquer the world, this has been successful. We will now enter into a new more stable global currency system. I hope nobody thought that the US dollar was for anything more then that.

  35. ItalicBold | June 11, 2009 at 2:18 am |

    Faber most certainly been spot on throughout this whole thing, he is the only one i know of who called the deleveraging, he also called top in oil. It is very rare for him to guarantee anything so I am quite surprised he has said there will be guaranteed hyperinflation. Definitely something to worry about. Well worth subscribing to his market commentary.

  36. Phil | June 11, 2009 at 2:13 am |

    @Stacey … ” based on the policies being enacted. What is your forecast??”

    Since you ask ….

    As everybody is expecting Hyperinflation and it “is” the logical consequence of the policies being enacted – it probably will NOT happen…. especially as the US$ as Reserve Currency will mean infection across all other fiats. i.e. WW leaders will bust-a-gut to prevent it happening.

    So my guess is that Govts. will continue to present false statistics ( eg. inflation, jobs etc. ) to cover things up in order to keep the music playing … until an event occurs like a freeze-up of the whole digital-fiat-money system such that they are forced to “do something” !

    And then … what next ?
    That is the question that interests me most.

    I remember when the Baltic-DRY-index tanked 95% in November…

    http://investmenttools.com/futures/bdi_baltic_dry_index.htm

    … and apart from the claim that export demand had suddenly stopped, the real reason IMO was that US-Bank’s Letters-of-Credit ( i.e. most banks WW ) were being refused by overseas exporters ( this was reported on the internet somewhere ).
    Which means … we don’t trust your LoCs , i.e. we don’t trust banks !

    Catherine Austin-Fitts talked at IRTA about “Barter” … how to swap goods “outside” the banking system ( that nobody should trust ). I think she’s spot-on … and I guess that such age-old “valuables” like Gold, Silver and other precious or staple metals will get back into the game at this point.

    I had a friend in high places in the 70′s/80′s at a well-known German Steel Company who used to arrange “swap trades” with Eastern Germany ( DDR ). They would trade X tons of steel for example with a “boatload of bananas” … no joke ! ( I presume the DDR had “other” swap-trades with e.g. african countries that supply bananas ). He told me it was an extremely interesting business, demanding lots of ideas and wit.

    The IMF’s SDR idea is basically trying to provide a “valve” ( a way out ) for maintaining confidence in the current system.
    And as these people still hold the “power” over us, I guess they will probably find a way of forcing this on us in order to continue fiat-system-inflation for another 20+ years at least.
    ;-(

    JMHO FWIW

  37. Skandinav | June 11, 2009 at 1:38 am |

    The hyperinflationists should read Mish’s post Peter Schiff Was Wrong:

    http://globaleconomicanalysis.blogspot.com/2009/01/peter-schiff-was-wrong.html

    Also, Humpty Dumpty on Inflation:

    http://globaleconomicanalysis.blogspot.com/2008/12/humpty-dumpty-on-inflation.html

    And please consider this list of external (gross) debt: The US has an external debt of 100% of GDP, which is quite a bit, but most West European countries seem to have a lot more?

    http://en.wikipedia.org/wiki/List_of_countries_by_external_debt

    Moreover, a devastating banking meltdown – if that occurs – should be deflationary, right? That is, people will be desperate to find and save money, not to get rid of it.

    I’m not an economist, and I’m really not sure which weighs heavier – the vague possibility of a sovereign default and a collapse in the value of all papers and fiat currencies (perhaps coupled with “Peak Everything”), or the strong deflationary forces that follow Peak Credit and increasingly skeptical attitudes toward debt.

    Anyhow, thank you for a passionate, unique and very interesting blog!

  38. Mike2liverpool | June 11, 2009 at 1:23 am |

    Morning Stacy
    Mike

  39. Phil | June 11, 2009 at 1:20 am |

    @snoop diddy … “Bailout! the Game”

    They want 34$ for the game !

    “When you Lose, You WIN! ”

    I prefer “Heads You lose, Tails I win” !

    LOL … gotta love the internet !

    I suppose the characters are :
    Wells Fargo
    Lehman Bros.
    Wash.Mutual
    AIG
    Citi

  42. MyGoldPrediction | June 11, 2009 at 12:46 am |

    I thought I might see this story posted by Phil yesterday be in the above set..

    http://www.asianews.it/index.php?l=en&art=15456&size=A

    Max talked about counterfiet bonds. In this case if the bonds are real, Italy pockets more than 40 billion USD in fines, if they are not, the issuers are in deep trouble..

    It also says Asia is especially worried about counterfeit bonds.

    How likely is it these type of revelations will cause serious conflict, or unlikely they won’t ?