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Thursday, 03 February 2011 14:36

Currency Crisis! Inflation! Sovereign Defaults! Bahhhh... Who Are 'Ya Gonna Believe, The Government Or Your Lyin' Eyes?

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There has been much discussion on the topic of inflation, deflation and hyperinflation. I, personally, am in the stagflation camp - basically the worst of both worlds. The evidence is plain to see to my virgin eyes: real asset prices are dropping through the floor (for four years now) while input prices (fuel, energy, supplies, commodities), food and the general cost to live (I have to phrase it differently since our government doesn't believe that this is true of the cost of

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living) is going up.

It truly amazes me that the everyday guy and gal can be convinced that inflation is tamed as the things that they need to survive - food, warmth, clothing - cost them more month by month. I remember when I made the opposite argument in residential and commercial real estate three years ago. Ben Bernanke said "green shoots", yet real assets sat stagnant and empty. Reference Who are ya gonna believe, the pundits or your lying eyes?

Jim Roger, besides being a rather colorful figure, has been correct on his commodities call over the last couple of years and he has been sounding the currency crisis and inflation call as of late. If anything, I give credit where it is due. I can't disagree with him on the currency front. This is what he had to say on CNBC regarding Social Unrest and Currencies:

More social and political turmoil is likely in the future so commodities prices will continue rising, renowned investor Jim Rogers, CEO of Rogers Holdings, told CNBC Thursday.... "I don't own very many equities," Rogers, who co-founded the Quantum Fund with billionaire George Soros in the 1970s, said in an interview. "I don't know what's going to happen but I expect more currencies turmoil, more social unrest, more governments collapsing so I invest more in currencies and commodes than stock," he added.
Rogers said he has had long positions in commodities for 12 years and has warned repeatedly that food prices will "go through the roof."
Shortages of food products are likely to last for a long time and create more upheaval and the ranks of farmers around the world have diminished, he said, adding that for some soft commodities it will take years to increase the stock.
"You don't just snap your fingers and have palm oil, all this takes time," Rogers said.

In June of 2009, he had a very similar stance, and he was correct (of course he had this stance for a while as well). These guys below put together a cogent argument.

The National Inflation Association guys have put together a relatively well produced video channel that appears to have an agenda, but also has many, many valid points on the topic. The phrase du jour... "The Keynsian solution to economic slowdown is to keep the bubble going". Ain't that the truth?

What is not mentioned in the interesting video below is that food inflation in US supermarkets is concealed by deceptive packaging. One way to surreptitiously raise the price on a box of serial is to put less cereal in the box and sell the box for the same price. This happens more than many suspect, particularly since most consumers don't bother to even glance past the pretty colors that illustrate the brand.

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