Jim Sinclair thinks Middle East will prosper in hyperinflation
Posted on 27 October 2008 with no comments from readersFrom www.jsmineset.com today, Jim Sinclair is the oracle for gold bugs:
“The most difficult concept for the professional public to understand is that hyperinflation can exist along with a totally disastrous economic environment. Hyperinflation falls flat because it fails to take into account the infinite velocity of money that a Weimar creates during a depression economy as a product of throwing monetary discipline at the wall.
When you pay people three times a day to keep up with prices, consider the mammoth daily increases in all private and business transactions in terms of the total number of currency units. What happens to the velocity of money? The turnover increases with the rate of inflation until both are hyper creating an unstoppable spiral.
Few understand that monetary inflation proceeds and sustains price inflation. For this reason world business in a rat hole with credit still jammed up will lead to hyperinflation in 2009-2010.
If world business is perceived to have bottomed and credit flows are re-established, this will bring hyperinflation in 24 hours.
We have heard both Russia and China chime in today on their clear perception of the pre-election falsely valued US dollar and government interference in not only gold but energy and food.
The PPT is working overtime on those index spreads but they only have a short time (13 to 88 days) before they have to throw it into what is most likely inexperienced hands.
Yes, a planetary Weimar is on the menu. Russia, the Middle East and China may just be the top survivors. Africa might just come into its own in such a scenario due to the amount of raw material and gold resources they have.”
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From Howard S. Katz today citing official US data:
The monetary base has increased by 35% in the past 6 weeks. This does not look to me like a contraction. It looks like the biggest expansion in U.S. history. And if you just cut through all the nonsense, the answer is obvious. The “depression” of the 1930s was caused by a 30% decline in the U.S. money supply (over 3 years). It was this factor which was responsible for the high unemployment. Anybody who can look at this chart and conclude that we are going to have a depression has his head screwed on backward.
But what about an “inflationary recession?” Haven’t we had such phenomena? Well, in today’s intellectual climate where most people run around shouting slogans and trying to create the greatest panic, almost anything can be alleged. There will be a period when money/credit is expanding. This will cause prices to rise. Then the rate of increase in the money supply is reduced. We would expect prices to continue to rise but at a slower rate. And the slowdown in growth of the bankers and their associated vested interests (the paper aristocracy) might be called a recession by the banker economists.
However, this case simply does not fit the facts of today’s situation. The money supply was flat for a few years up to September ’08. It has not reduced its rate of expansion. It has sharply increased it.