• Welcome to our new home!

    Please share any thoughts or issues here.


The US Dollar Hyperinflation Heats Up

jonahtrainer said:
Looks like they have been creating money at a record pace. The hyperinflation is heating up.
Click to expand...

Wow, look at that chart!!! :eek:
StLouisMonetary%20Base.png
 
Hmm, this leads me to conclude Gold will be down on Monday, as it typically moves in the opposite direction of what I think it should be doing

:)
 
Cowlesy said:
Hmm, this leads me to conclude Gold will be down on Monday, as it typically moves in the opposite direction of what I think it should be doing

:)
Click to expand...

Yep, and since silver is tied to gold, it will be down as well.
 
I would think silver n gold woul d move down on monday if a bailout plan is made....I hope so, cause I want a dip to buy more.....:D
 
No doubt it will go down on Monday if the plan goes through. But back up soon there after.
 
Gold should be over $2,000 / oz according to that chart...maybe even higher. Look at March 2008 when we were over $1,000. That spike doesn't even compare.

Somebody is really trying their damn hardest to keep the price of PM down. Keep on buyin' folks.
 
According to the article, they are extrapolating two week's data and assuming that it continues at the same level for six months.
The St. Louis Federal Reserve reported that in two weeks the monetary base has increased 7.6%. Compounded for 26 periods results in a 680% annual increase.
Click to expand...
The base money supply will not likely keep up that rate non- stop for six months. Look at the rest of the graph and you can see that it moves up and down.
 
Folks, let's keep some perspective here. This is a $75B increase in the monetary base.

That doesn't even begin to pale in comparison of the size of the credit derivatives markets. There is now officially one quadrillion (one thousand trillion) in derivatives worldwide, according to the BIS. This is like throwing a bucket of water in the ocean. It simply does not matter - even though it looks like a huge change on the chart.

I suggest reading this: http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e080924#e080924
 
Zippyjuan said:
According to the article, they are extrapolating two week's data and assuming that it continues at the same level for six months.

The base money supply will not likely keep up that rate non- stop for six months. Look at the rest of the graph and you can see that it moves up and down.
Click to expand...
Precisely. See my thread http://www.ronpaulforums.com/showthread.php?t=158868
and final post http://www.ronpaulforums.com/showpost.php?p=1717557&postcount=11 in response to the chart posted in this thread.

Brian
 
If they pass the bailout bill, since there is barely anyone willing to give us 700 Billion, the Fed will have to print (or type into a computer), being conservative, at least 500 Billion to cover the cost of the bailout. Since there will be more bailouts and more banks will fail, by the end of the current credit crunch, the money supply in the United States could double, possibly more.
 
StilesBC said:
Folks, let's keep some perspective here. This is a $75B increase in the monetary base.

That doesn't even begin to pale in comparison of the size of the credit derivatives markets. There is now officially one quadrillion (one thousand trillion) in derivatives worldwide, according to the BIS. This is like throwing a bucket of water in the ocean. It simply does not matter - even though it looks like a huge change on the chart.

I suggest reading this: http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e080924#e080924
Click to expand...

I keep hearing that the BIS estimated the derivatives at 1 quadrillion, but I have yet to see a link to the BIS report that says that. I'm not doubting you; I'd just like to have the link to share with others.
 
LibertyEagle said:
I keep hearing that the BIS estimated the derivatives at 1 quadrillion, but I have yet to see a link to the BIS report that says that. I'm not doubting you; I'd just like to have the link to share with others.
Click to expand...
You are referring to the notional amount of derivatives. This can be very misleading. The following is something I wrote a couple of weeks ago ... hopefully it helps.



I have written several times in the past about the large size of the derivatives market that is traded over-the-counter. As of the end of last year, the sum notional amount of the derivatives market is nearly $600 trillion. The gross market value of the derivatives market is over $14.5 trillion. I am sure we are well past both now.

Reliable information is only updated once a year. You can go to the BIS (Bank of International Settlements) website to find a nice breakdown of the OTC derivatives market (http://www.bis.org/statistics/otcder/dt1920a.pdf). As I alluded to earlier, the Credit Default Swaps (CDS) market is small in comparison to the Interest Rate Derivatives market. The total notional amount of CDS was less than $57 trillion at the end of last year, with the gross amount at about $2 trillion. Meanwhile, Interest Rate Derivatives totaled over $393 trillion of notional value and nearly $7.2 trillion in gross market value.

It should be noted that the notional amount is really used to provide a comparison of market size between related derivatives markets and does not provide a measure of counter-party risk. That is, it is not a measurement of exposure as principal payments are not made in derivatives transactions as they are with equities, bonds, loans, etc. But the periodic payments made in derivatives are based on the notional amount (the payments are not the notional amounts themselves). The gross market value refers to the replacement cost of the outstanding contracts at prevailing market prices.

There are various types of Interest Rate Derivatives, the most popular being Interest Rate Swaps. There is also the Interest Rate Cap, Forward Rate Agreement, Interest Rate Swap Option and Bond Option, and good old Interest Rate Futures contracts (these are not included in the above numbers as they are traded on an exchange), among many more. It is probably best to focus on Interest Rate Swaps since they dominate not just the Interest Rate Derivatives market, but the Derivatives Market as a whole (using notional values).

Interest Rate Swaps, like most derivatives, foremost are financial instruments used to hedge risk. But the rapid expansion of the derivatives markets in recent years and increased use of leverage has seen financial institutions increasingly (an understatement) use these instruments for simple naked profit as well. At a basic level, each counter-party agrees to the payment of a stream of income. One stream is based on a fixed rate and the other a variable rate. The floating rate is usually based off of LIBOR. The fixed rate is referred to as the swap rate. Here counter-parties can hedge their loan portfolio for example. But they can also use these derivatives to bet on the future of interest rates. All interest payments (payment streams) are settled in net, with the payments calculated using the interest rates (floating rate or swap rate, depending on the counter-party) applied against the notional amount. So, you can see why the notional amount does not provide the measure of counter-party risk.

The problem with these derivatives is that the investor is exposed to counter-party risk. And when there are only a limited number of trading partners comprising the pool of investors for all of these derivatives, the counter-party risk is elevated considerably. Most all of the outstanding OTC derivatives are held by ten banks and primary dealers - JP Morgan I believe is the largest with about $100 trillion in notional value. The tangled web of counter-parties is so complex, that nobody understands the inherent risk in a particular party defaulting. As we have seen with the default of Lehman debt in the credit markets, it has already had a ripple effect in the money markets (look at the money market funds that have recently broken the sacred $1/share benchmark) as well as the credit default swaps on the balance sheets of these financial institutions. And now you can see that the size of the interest rate derivative market is substantially larger than the credit default swap market currently causing significant problems in our financial markets.

Finally, think about this ... if interest rates go hard one way (up significantly would be very, very bad), it will trigger a number of defaults on these contracts. As the financial world has learned, these "insurance" instruments work fine if the level of losses and default is reasonable. But if a significant portion of counter-parties cannot afford to "pay up", significant damage can be inflicted upon the financial system (the counter-party on the winning side of the contract does not get paid). Especially when you again consider the complex web of counter-party positions (small number of counter-parties, lots of contracts). This is exactly why Bear Stearns and AIG were rescued (avoid the domino effect at all costs). And as far as interest rates going up significantly ... folks, we are in a bond bubble. What do you think is going to happen with interest rates when foreigners finally get tired of accepting trash rates for their rapidly depreciating dollars (the printing presses are being warmed up)? They are going to demand higher rates. If the Treasury chooses not to pay these higher rates at auction, the Federal Reserve has no choice but to monetize its own debt. That is, purchase its own debt with money created out of thin air. Hello inflation and a vicious cycle.

Brian
 
You must log in or register to reply here.

Similar threads

PAF
Devaluing the US Dollar: How to Make America Poorer Again
Replies
0
Views
23
PAF
PAF
PAF
BRICS: China Dumps The Largest US Treasuries in History
Replies
8
Views
1K
PAF
PAF
W
Fake US economy Growth US economy is neither in recession
Replies
1
Views
178
WarriorLiberty
W
PAF
Can Trump Save the Dollar?
Replies
2
Views
950
Anti Globalist
Anti Globalist
Occam's Banana
Inflation: Causes, Consequences, and Cure
Replies
13
Views
5K
Matt Collins
Matt Collins
Back
Top