Inflation Or Deflation?

My short, waggish answer to this question is yes. 

The only way you can have hyperinflation is if the government decides to do it. This seems unlikely, but not impossible. A far greater risk is deflation, which would cause the government to print too much money, which would cause inflation, which would cause the government to tighten, which would cause deflation. An endless cycle of chaos. This is my interpretation of the data. 

A lot of the "guys" are expecting 2014 to be the "year." I am not. I expect sideways movement. Governments will continue to prop things up. China just did by bailing out a bank that was due to default on $500 million. No one is saying where the money came from, but there are no other possibilities. Turkey raised their interest rates to 12%. This will solve the currency problem they have but will present problems for those who have loans that need to be rolled over. Russia is spending $400 million a day defending the ruble. Russia's reserves are better than most but are not infinite. 

Governments will continue to interfere with the market and will for the most part succeed. President Clinton will have to deal with this in 2017.

Ambrose Evans-Pierce is one of the economic writers I follow. His latest musings led to this blog post.

Old Interview with Murray Rothbard

While this video is of appalling quality, the subject matter was interesting enough to post here. 

Dow Is Too High, and Too Low at the Same Time

If interest rates rise or corporate profits drop, the Dow Jones industrial Index will fall.  I think this inevitable even though I expect everything to go "sideways" this year. 

But yet at the same time the Dow is too low because of inflation over the last few decades. The Dow's purchasing power has declined substantially. Rather than try to reproduce someone else's work, I thought I would link to Charles Hugh Smith's blog where this point is made in charts far better than I could. 

My Predictions for 2014

I just looked over my predictions for 2013. Here is one I got right:

All the goldbugs will continue to predict economic collapse. They will be wrong. The strength of the economic system will continue to amaze the naysayers. The dollar is headed up. In the US things will actually improve with modest growth. What do you expect to happen with the Fed printing 1 trillion dollars? Japan will implode, but not in 2013. Europe will implode as well, also not in 2013. The can will be kicked. Buy gold anyway. (Note I am not an investment advisor, but an unpaid satirist.) 

Let me repeat this prediction for 2014. I still expect a crisis relatively soon, but there is still some life, albeit artificial, in the "old gal" yet. 

Laying aside my tongue-in-cheek  predictions in honor of the Amazing Criswell, I got one right, one wrong, and one it is too soon to tell. 

I am surprised that Obama did not invade Syria, very surprised. I guess he looked at the polls in November and decided he did not need to. I cannot see him doing it now. The same with Iran. Of course my predicting it won't happen may be the strongest indication yet that he will intervene. 

It is too early to know how the Catholic Church will react if it is forced to pay for abortions for its secular employees in its non-church arms. I thought that they would shut down, or sell the institutions to straw buyers. Most of the court cases are going in favor of allowing employers to opt out. But since the Supreme Court already ruled that ObamaCare was legal, I wonder if they will modify this. 

So for 2013 I was 1-1-1. Not very good. Well, I could include my prediction about the royal baby to increase my score! Nah. (Yes, I know my suggestion to buy Gold was not a good short term move. I bought it as a put on the economy, so my loss of 20% on my entrance price was not too troubling.) 

So I am still predicting no crash for 2014. Gold will go up modestly. There may be some preliminary signs of "the wheels coming off the bus," but no more than that.  

It will be a cold winter in North America, not so cold in Eastern Europe.  

Twitter, Facebook and all such over-hyped stocks will plummet. Other stocks will decline, but only modestly.

Interest rates will rise. 

So that makes 4 somewhat serious predictions. Now on to the really important ones. 

I predict that a reality show star will run against Mary Landau for the senate in Louisiana.  He will sell more merchandise. 

President Biden will sign a law repealing ObamaCare.  

Men will marry men, and women women. Er ..., oh wait, never mind. 

People reading my blog will lose lots of weight and get healthier. 

All the predictions about Elvis being alive will die down when Andy Kaufman appears live on Saturday Night Live. He will sing the Mighty Mouse song. 

And finally, it will be discovered that Saudi Prince Bandar supported the 9-11 hijackers. No one will care. 

Paul Craig Roberts

Paul Craig Roberts has given an interesting interview. He covers all of the themes I have been harping on. The markets are manipulated through inside knowledge. The gold market in particular by what are called the bullion banks. It can't continue, so it won't. His conclusion that the people want their illusions echoes what I said Saturday. Roberts is one of the people I will continue to follow, even as I reduce my consumption and therefore my blogging of this kind of news. 

Here is the interview.