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 Topics)."

Why Not Hyperinflation?

One person who gets it right is Professor Depew at Minyanville in his post Five Things You Need to Know: Why Not Hyperinflation?

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 credit equation.

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

Editor, Financialarmageddon.com

Michael 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.