Some might be
skeptical, but I've seen skilled technical analysts take nebulous-looking stock
charts and add lines and descriptions that suddenly provide a great deal
of clarity about what is going on.
While I'm not totally
sure how talented he is as a chartist, Mike Shedlock, publisher of
Mish's Global Economic Trend Analysis, draws (yes, that's a pun) some
counterintuitive conclusions from a graph that has many inflationistas
foaming at the mouth in "Parents Pull Kids From Day Care (And Other Deflationary
One person who gets it right is Professor Depew at Minyanville in his post Five Things You Need to Know: Why Not
Almost every day I
get notes wondering, "Why not hyperinflation?"
This is a good
question. I'll try and explain why I believe a deflationary debt unwind is
now underway, and why I believe it will be many years before we should start
worrying about inflation again. In fact, by the time inflation becomes a
legitimate concern, I expect the vast majority of people will find it as
outrageous to worry about inflation then as found it outrageous last year
when I made deflation one of my Five Themes for 2008.
While it is true, as
those anticipating hyperinflation argue, the Fed and global central banks are
making record amounts of credit available, that is only one side of the
The assumption is
that this record-breaking credit expansion means risk assets (stocks,
commodities, etc.) will all skyrocket and the U.S. dollar will get destroyed.
But what hyperinflationists fail to realize is that for an inflation (of
either the tame or hyper variety) to take place, one must have both the means
(credit from the fed and banks) and the motive (the desire to take on more
debt) for credit expansion. For over a year now we have had record amounts of
the former, but none of the latter. ...
I concur with that
opinion and by now it would seem that inflationistas would have caught on. But
they haven't. Nor will they. And articles about shrinking day care,
collapsing retail sales, rising unemployment, record foreclosures, massive
credit card defaults, bankrupt insurers, collapsing auto sales, sinking
commercial real estate, plunging commodity prices, and dozens of other things
will not change their minds either including an implosion in China.
For more on China and a decoupling theory now totally blown out of the water please see Peter Schiff Hugely Right, Enormously Wrong
as Hard Landing Hits China.
The latest chart that
has the inflationistas going gaga looks like this.
Base Money Supply
Chart Courtesy of St. Louis Fed
Click On Any Chart For Sharper Image
I must admit that
chart looks pretty scary. However, let's look at it another way.
Base Money % Change
From A Year Ago
Now that looks even
scarier. The only other times we have seen base money supply soar like this
were in the Great Depression and World War II.
While on this subject
let's look at the same chart as above one more way.
The only other time
since 1918 that the base money supply chart looks like it does recently was
right before the Great Depression.
Michael J. Panzner
J. Panzner is a 25-year veteran of the global stock, bond, and currency
markets and the author of Financial Armageddon: Protecting Your Future from
Four Impending Catastrophes, published by Kaplan Publishing.