:eek: U.S. Inflation to Approach Zimbabwe Level, Faber Says

[classicman]

May 27 (Bloomberg) -- The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.

Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.

“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”

Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officials’ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.

“There are some concerns of a risk from inflation from all the liquidity injected into the banking system but it’s not an immediate threat right now given all the excess capacity in the U.S. economy,” said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. “I have a little more confidence that the Fed has an exit strategy for draining all the liquidity at the appropriate time.”

In case you think he is just a kook ...

Faber, the publisher of the Gloom, Boom & Doom report, said on April 7 stocks could fall as much as 10 percent before resuming gains. The Standard & Poor’s 500 Index has since climbed 9 percent.

Faber, who said he’s adding to his gold investments, advised buying the precious metal at the start of its eight-year rally, when it traded for less than $300 an ounce. The metal topped $1,000 last year and traded at $949.85 an ounce at 12:50 p.m. Hong Kong time. He also told investors to bail out of U.S. stocks a week before the so-called Black Monday crash in 1987, according to his Web site.

That is a really REALLY frightening prediction.

[Beestie]

I predicted that it would rain on March 13 and I'll be damned if it we didn't get a torrential downpour on March 13th.

Never mind that I also predicted it would rain every single stinkin' day this year.

[ZenGum]

Maybe this is the plan to deal with the US foreign debt: devalue the currency, and pay it off with paper.

With Weimar Germany, excess printing caused hyperinflation which meant that it took more and more Marks to pay the war reparations.

Today's USA has one huge, important advantage: the debt is denominated in US dollars. Devalue the dollar, and you devalue the debt.

Sure, it will screw every person holding US dollars in cash, or any US dollar denominated asset - bank deposits, bonds, debts, etc - but a lot of those people are foreign nationals: China, OPEC etc.

Massive government borrowings usually cause inflation. Just ask TW about paying for the Vietnam war and the inflation of the 1970s.

Not only are wise investors hoarding gold, they are holding anything other than cash denominated assets. China has steadily increased their imports of iron ore from Australia all year, despite their steel production falling dramatically for the last 6 or 8 months. They'd rather have iron ore than over-priced paper.

But .... hyperinflation? Of the insane Zimbabwean levels? I don't see that coming.

As Beestie alludes to, this guy may have made a few good predictions, but he hasn't told us about all his bad predictions along the way.

I say, stock up on long life food. That will be the real currency after the crash, and if not, well, you can always eat it.

[classicman]

Yeh, I know that his predictions are way out there - thats why I posted this though. I wonder what the real situation will be and if they can restrict the amount of currency/raise rates/whatever appropriately to lessen the burden when the time comes.

[piercehawkeye45]

What?

Zimbabwe has like a 1 billion dollar note. It says 2.5%, that is not close to 231 million %.

[TheMercenary]

Originally Posted by ZenGum

I say, stock up on long life food. That will be the real currency after the crash, and if not, well, you can always eat it.

I am building my bunker in the hills for the crash.

[ZenGum]

I have a friend who keeps two weeks' supply of food, water ... and tamiflu ... seriously.

[piercehawkeye45]

The Big Inflation Scare

Suddenly it seems as if everyone is talking about inflation. Stern opinion pieces warn that hyperinflation is just around the corner. And markets may be heeding these warnings: Interest rates on long-term government bonds are up, with fear of future inflation one possible reason for the interest-rate spike.

But does the big inflation scare make any sense? Basically, no — with one caveat I’ll get to later. And I suspect that the scare is at least partly about politics rather than economics.

http://www.nytimes.com/2009/05/29/op...ml?ref=opinion

Hopefully this view will turn out to be correct...

[TheMercenary]

Originally Posted by ZenGum

I have a friend who keeps two weeks' supply of food, water ... and tamiflu ... seriously.

We do the same, minus the tamiflu, but we use the excuse that it is for a storm situation like Katrina, which it is. But it makes a nice excuse for me to buy stuff that my wife will buy off on. We keep on hand 3 gallons per day per person for a 2 week period, lots of ways to cook, canned food, propane, generators, gas for the 4 wheeler, boats, chainsaws, etc. Oh and a whole bunch of ammo. A storm could hit ya know.

[Pie]

Originally Posted by ZenGum

I have a friend who keeps two weeks' supply of food, water ... and tamiflu ... seriously.

I'm not a fear-monger. And I have a two-week supply of food, water and yes, tamiflu. Other basic medications. Prescription meds. First aid. Everything but a shotgun.

[glatt]

We used to always have a two week supply of food on hand, but the kids have amazing appetites, and the two week supply lasts about 4 days now. We need a bigger pantry.

[richlevy]

He also told investors to bail out of U.S. stocks a week before the so-called Black Monday crash in 1987, according to his Web site.

Big grain of salt there.

We have some stuff. Our pantry actually has a bit of food in it, some of which is expired. But in a bad situation, eating a can of peaches that's 3 months past it's 'best by' date is better than the alternative.

[xoxoxoBruce]

Originally Posted by TheMercenary

...We keep on hand 3 gallons per day per person for a 2 week period,...

Of wine?

[TheMercenary]