Dans ce premier article, le très déflationniste Mike Shedlock est invité à s'exprimer sur le blog du très inflationniste Martenson. Je suis assez d'accord avec tout ce qu'il développe, surtout sur les délires à la Gonzalo Lira au sujet de l'hyper inflation, et dont on me semble encore très loin aujourd'hui, ou encore sur le dollar qui est très survendu :
|Straight Talk with Mike Shedlock (aka "Mish")|
|Chrs Martenson, 27/10/2010 (traduire en Français )|
Our inaugural Straight Talk contributor is Mike Shedlock, author of Mish's Global Economic Trend Analysis, one of the most visited and respected economic blogs on the Web. Mish is an outspoken deflationist and outlines his rationale for being so in his answers to our questions. He is also a registered investment advisor representative for SitkaPacific Capital Management.
Mish : It certainly helps not having a background in economics as taught by academia today. Nearly everyone in academia is a Keynesian or Monetarist.
It is safe to say that Krugman is the high priest of the Keynesians. In current academia, Greg Mankiw is arguably the high priest of the Monetarists. If we include the Fed, then the Monetarist high priest is without a doubt Ben Bernanke, whose background just happens to be academia, as opposed to any real world experience.
I find it amusing to see the battles between the two camps when they are both wrong about their proposed solutions. The only thing they are ever right about is when they attack each other.
Mish : I am a firm believer in peak oil. I don't know how anyone can deny it.
Given peak oil, and given the demand from China for oil and other commodities, the world is on a crash course of demand that cannot be filled.
China is growing at 8-10% a year (assuming you believe the stats). Can China keep growing at that rate forever? For even 10 more years? What about India? Brazil?
Either we get some serious energy breakthroughs, China slows, or the standard of living drops in the US, UK, and Europe. Well China does not want to slow, and the US and Europe are fighting hard to maintain a standard of living that is not sustainable.
Historically these situations end up with war. That is an observation, not a prediction.
Something has to give, perhaps many things, but all of the people who think China will soon be the number one economy in the world and that China's growth is sustainable, better start thinking about the implications of what I just typed above.
Money Multiplier Theory is Wrong
It is important to understand that widely believed money multiplier theory (the Fed prints and the money makes its way into the economy 10 times over) is wrong.
The reality is credit expansion comes first, reserves come second. I discussed this at length, using some charts from Steve Keen, in Fiat World Mathematical Model
Yet, talk is all the rage "just wait till all those reserves come pouring into the economy, it will cause hyperinflation". I have to laugh because the thinking is ass backwards.
What Really Happened?
1. Greenspan lowered interest rates fueling housing speculation and a credit bubble.
2. The housing/credit bubble burst.
3. Credit plunged as did credit marked to market.
4. In the wake of plunging credit the Fed stepped in to provide reserves for banks.
5. Consumer psychology changed and there is no demand for credit so it sits there as so called "excess reserves", earning slight interest for banks to help them cover losses still to come from foreclosures, credit card losses, and commercial real estate losses.
Looked at in this fashion there are not really excess reserves at all.
Please see Fictional Reserve Lending And The Myth Of Excess Reserves for further rebuttal to the notion that monetary printing will soon have the inflation genie flying out of the bottle.
In response, value of debt "marked to market" on the balance sheets of banks went from pennies on the dollar to full value. Credit did not expand but credit marked-to-market sure did, even if it is impossible to say precisely how much.
Thus my model suggests 2007 to February 2009 were periods of deflation, March 2009 to May 2010 were periods of inflation, and now we are likely back in deflation but it is hard to say given institutions do not mark assets to market. Extend and pretend is massive.
Looking ahead, my model suggests we go in and out of deflation for a number of years, just as Japan did, without the economy ever picking up any steam.
With fiat currencies, the probability of inflation approaches 100% given a long enough timeframe. However, we need to fix numerous structural issues, write off enough bad debts, and get to the bottom in housing before there is a serious chance of sustained inflation.
I am not calling for consumer prices to collapse (except in unneeded junk), but that could conceivably happen. By the way, because energy and food prices have been sticky compared to housing, we hear the statement all the time, "we have inflation in things we need and deflation in things we want."
No we don't. The statement is inaccurate because it defines inflation in terms of prices. With a proper definition one does not have inflation and deflation at the same time.
Critical Player is Congress, Not the Fed
The longer the Fed and Congress fight deflation, the longer it will take to play out. It could take 2 years or 10. The attitude of the next Congress, and the Congress and President after that will be crucial.
I believe the next congress will throw around fewer stimuli than the current one. I could be wrong. But 2 years will not seal the fate. There will be a presidential election in another two years.
Will we get a Chris Christie or another Obama? That is an undecided factor very much in play.
The critical point of this discussion is everyone's misguided focus on the Fed. The Fed arguably has a role, but Congress is a far bigger player than the Fed in determining the length of the path we take.
Interestingly, Bernanke, a Monetarist, recently chastised Congress over budget issues. This likely has Krugman going bananas.
Certainly US treasuries are universally despised. People were shorting 10 year notes at 4%. Yikes!
However, after this rally it is hard to be super-bullish on them now. Bullish yes, super-bullish, no. I would advise not shorting them.
I do not think the gold story is fully understood yet. It may not be hated, but it is not loved like technology or housing was. Thus I think more will come from gold but it will not necessarily be from here. We can easily have a sharp correction first.
The one thing not despised but universally ignored is Japanese equities. For a long-term hold perspective, I like Japan. Apathy is a great setup. Otherwise, there is precious little to like about anything.
This market, including corporate bonds, is way over-loved. Sentiment is extreme, and earnings expectations will not happen. The market can keep going up, but the risk-reward setup is horrendous.
Hyperinflation is a Political Event
The commonality between Zimbabwe, Weimar, and Argentina is they are both political events. In Zimbabwe a political event triggered capital flight, in Weimar a political event started massive printing, and in Argentina everything collapsed when a foolish peg could not be sustained.
In each case, a collapse of faith in currency (hyperinflation) led governments to massive printing campaigns, not the other way around.
The US compares to Zimbabwe how?
The US compares to Argentina how?
Is anyone going to force the US into war reparations?
The idea that we are going to wake up one day and suddenly out of the blue face hyperinflation may be theoretically possible but it is extremely unlikely in practice.
Besides, the Fed cannot give money away. And as I have pointed out, Bernanke is even chastising Congress about fiscal spending. The Fed would not give away money even if it could!
Sure, the Fed can provide liquidity, but it cannot force businesses or consumers to borrow. Yet people tell me the Fed will cause hyperinflation. It does not add up.
There is a lot of confidence in the Fed's ability to produce inflation. Indeed, I think there is a bubble of confidence in the Fed's ability to produce inflation.
Should that bubble burst, equities can collapse far faster than most think possible.
Hyperinflation is theoretically possible, but highly unlikely in practice for reasons stated above. But what if Prechter is right? Actually I think the grand-supercycle collapse he is calling for is also highly unlikely, although it too is certainly possible.
Is worry over such extremes or attempts to profit from such extremes at this stage a waste of energy? I think so.
Anti-dollar sentiment is once again extreme. It is quite similar to the extreme anti-Euro sentiment a few months back. Look at what happened. Are we setup for another reversal?
Dans ce post ci, Mish revient sur la bulle de crédit en Chine.
|Misguided Love Affair with China; China's Massive Monetary Expansion and Crackup Boom|
|Mish's Global Economic Trend Analysis, Mike Shedlock, 29/10/2010 (traduire en Français )|
Dollar issuance by the United States is "out of control", leading to an inflation assault on China, the Chinese commerce minister said in comments reported on Tuesday.
Mish explique que ceux qui impriment des billets de manière totalement incontrolée, ce ne sont pas les américains contrairement à ce que les chinois ont raconté, mais bien les chinois eux mêmes :
Money and Quasi Money Jan 2009 - 496 135
Money and Quasi Money Sep 2010 - 696 384
Total Chinese money supply is up over 4 times since '03, a 17%/yr. rate at a doubling time of just 4 years; up 66% since Jan. '08, a 19%/yr. rate at a doubling time of 43 months; and up 40% since Jan. '09, a 20%/yr. rate at a doubling time of 40 months.
Knowingly or otherwise, China has experienced a textbook faster-than-exponential money and debt/asset blow off or crack-up bubble that mathematically cannot continue. All faster-than-exponential bubbles burst and collapse, with prices falling back to the levels at which the differential rate of GDP and money began to diverge at an order of exponential magnitude, which was around early '02.
Do Schiff, Faber, or Rogers ever talk about China's reckless, hyper-inflationary money supply growth? This kind of money supply growth is banana republic-like, making our feeble efforts appear benign by comparison.
This situation is INSANE, and the crash coming in China-Asia will be unprecedented in world history.
One might think that a country whose money supply is doubling every 40 months and growing exponentially since 2003 would not be pointing the finger elsewhere, complaining that others are "out of control".
One might also think those screaming about hyperinflation would scream about happenings in China, not just the US.
One would be wrong on both counts.
Moreover, unlike US monetary expansion that sits as excess reserves, China's money supply growth has spawned massive lending sprees, property bubbles, and asset bubbles in general.
In a fiat credit-based society, credit-expansion not reserve-expansion is the key to understanding inflation. Credit is contracting in the US but running rampant in China. It should be no wonder China shows signs of an inflationary crackup boom and the US is mired in deflation.
It is important to understand the drivers behind China's growth.
1. Rampant monetary expansion
2. Property bubbles including completely vacant cities
3. US and European outsourcing
4. Malinvestment in infrastructure
That the US and EU economies (60-65% of world GDP) can no longer grow because of demographics and Peak Oil, and China is heavily dependent upon global markets for continuing US firms' investment and derivative growth of Chinese domestic investment, production, and exports, Peak Oil and China's terminal velocity occurring for the largest credit bubble per GDP in history implies that China faces an unprecedented contraction, with the risk that GDP per capita will fall at least 50% in the coming decade.
China bank profits defy loan problems
Much the same way the US housing bubble did not matter until it did, China bank profits defy loan problems
Financial Times : Bank of China and Agricultural Bank of China both reported rises in net profit of nearly 30 per cent in the third quarter in spite of government attempts to slow new lending and rein in asset prices.
Analysts, regulators and even the banks warn that the big expansion in lending, with the volume of new loans doubling from a year earlier to Rmb9,600bn in 2009, will almost certainly lead to a large rise in non-performing loans as many borrowers eventually default.
With credit still relatively easy to obtain and with economic growth still above 9 per cent, many of those asset problems are yet to materialise.
Parabolic expansion of housing prices, credit, or asset prices never ends well. Yet because the US bubble has burst while the various Chinese bubbles have not, various economic pundits are chanting nonsense once again about decoupling scenarios, even in the midst of currency wars and competitive currency debasement.
This love affair with China will not end well for the US, for China, and especially for the commodity producers like Australia and Canada, each in huge denial about their own property bubbles.
Ça me semble un peu extrême parce qu'à le lire, tout est une bulle. Surtout pour les infrastructures. Malgré quelques dérapages évidents, j'ai du mal à imaginer que l'investissement de la Chine dans les infrastructures élémentaires pourrait être du "mal-investment". Mais il y a clairement du vrai. La Chine craque sur son expansion du crédit...