Inflationists and even hyperinflationist are coming out of the woodwork. Even some people I highly respect have jumped on the hyperinflation bandwagon. Given that the Flow of Funds Report Offers Hard Evidence of Deflation, I am not changing my tune.
Some of the inflation fears stem from a falling US dollar that seems to me to be range bound. In addition, there has been a strong rebound in commodity prices. OK oil prices more than doubled from the December low to over $70. However that is a far cry from $140.
Even many deflationists (at least me) thought oil prices bottomed and Treasury yields may have. Yet, suddenly a snapback rally in commodity prices is supposed to mean a powerful surge in inflation, perhaps even hyperinflation?
WTIC – Light Sweet Crude Weekly
click on chart for sharper image
On a log chart the oil rebound looks impressive. On a retrace perspective, the story is different. The first Fibonacci retrace level at 38.2% has not even been reached. This is hyperinflation?
Fear the Dark Side of China’s Lending Surge
The easy scapegoat for rising commodity prices is a collapsing US dollar, strong inflation or even hyperinflation in the US. Sadly, few seem to have noticed (except when it is convenient to their theories) that this is a global economy, peak oil is a factor, and so are happenings in China.
I had a bookmark of an interesting post by Andy Xie lined up for today to talk about. It’s called "Fear the Dark Side of China’s Lending Surge". Unfortunately the post is no longer available or the site is now restricted.
However, Yves Smith at Naked Capitalism posted it earlier this weekend. Please consider Xie: Chinese Banks Funding Commodities Speculation, Casting Doubt on Recovery
The current surge in commodity prices, for example, is being fueled by China’s demand for speculative inventory.
Commodity prices have skyrocketed since March. The weak global economy can’t support high commodity prices. Instead, low interest rates and inflation fears are driving money into commodity buying.
Exchange-traded funds (ETFs) alone account for half of the activity on the oil futures market. ETFs allow retail investors to act like hedge funds. This product has serious implications for monetary policymaking. One consequence is that inflation