Wednesday, December 28, 2011

The Coming Financial Border Controls: Its Berlin All Over Again

As nearly always, Martin Armstrong's latest is a MUST READ!!
Armstrong discusses financial border controls, heavy doses of history pertinent to our current crisis, and describes that while the final outcome of our current debt crisis is likely to be hyperinflationary, the deleveraging of the housing market is resulting in deflation currently.

We are suffering the simultaneous effects of DEFLATION and INFLATION, which can be called STAGFLATION. In other words, there will be no hyperinflation at this stage in the game and the increase in currency by the Federal Reserve using the “elastic money supply” tool, will not even be inflationary despite creating nearly $3 trillion.

If we look at the peak in debt in 2007 in the United States, only one slice of the real money supply, the general leverage stood at nearly $60 trillion, This is based upon Federal Reserve data. If we now factor in the deleveraging of 60% we get a figure of $24 trillion. Of course, this is well below official estimates because they are not marking to market all debt. This would be at the most extreme nadir. Nonetheless, if the Fed increases the money supply by $2.3 trillion through its elastic capability, we can see this is like pissing in the wind – consquently QE1 and QE2 produced no inflation even if the deleveraging was only 25% say $15 trillion off the top rather than 60%.
Despite all of these trends, and the ultimate conclusion being inflation, in the near-term we remain in a deflationary environment with a massive deleveraging of the economy that cannot be reversed even with $3 trillion of new elastic money by the Federal Reserve. The collapse of Europe becomes inevitable for there also government will not address the structural flaws and will only increase its oppression against the people as if taking every euro will somehow reverse 60 years of fiscal mismanagement. The dollar may rise sharply thanks to deflation, and we may see the worst of every possible trend before this nightmare comes to an end.

Read Armstrong's entire analysis by clicking the PDF below:
The Coming Financial Border Controls It's Berlin All Over Again