Stgaflationary first Dav ....... cos we gotta still keep them threatening black holes in check ...... we havent YET seen the real asset deflation bite in Oz outside the equity markets ........ watch property markets here next year.
But longer term sure. My simple equation is check the total global GDP growth since 1980 and compare with total M3 growth in same period. U will prob find M3 at multiples higher. reality is on average over the LONG cycles, M3 growth should equal GDP growth, otherwise the "currency" (in this case all paper) needs to DEVALUE to come to a balance.
Havent looked but suspect M3 growth is multiples of what it should be hence it will need to devalue greatly against the real stuff and prob overshoot first on the downside.
But in meantime, cash is king cos cos debt is death ..... generally speaking. Just ask the hedge funds and investment banks atm.
Since USD is still the reserve currency by default, u can apply this simplicity to USD cf GDP expansion .... but ALL paper will follow suit in a musical chairs of attempted trade markets balance.
The SOBERING thought to this "simplicity" is that GLOBAL NOTIONAL DERIVATIVES SIZE is increasing EXPONENTIALLY atm ........ last year est was about 500 trillion, few weeks ago it was 1300 trillion (gotta start thinking in terms of "quadrillion" = 1000 trillion). World GDP growth CANNOT keep pace with this ....... and ALL THE GODS HELP US if they try to keep M3 up to pace with this !!! Anybody study Germany in 1930s, Greece in 1940s, Zimbabwe now ???
Dont know HOW without total default triggering global DEFLATIONARY DEPRESSION, but "they" have to somehow herd all these "financial instruments" into one big toxic wastebin and rocket them off towards the sun before they wipes out the global financial system and bring on the next Mad Max in this world ..... BBB philosophy. Didnt Nostra predict this ... "There will be a scramble for the yellow metal ..." ?
Thats why u need some kinda broad BALANCE in thinking and strategy and be alert and nimble to move fast. When was the last time bank deposits en-masse were FROZEN in Oz ? (Great Depression actually). And the fallacy of RBA "guarantee" .... what does this mean if yr access is denied whilst meantime yr deposits get devalued into nothing ??? Gotta have some gold sovereigns in a safety deposit box methinks just in case u need to buy rice in the New Ages ahead.
Just like we have AD and BC at the "zero" line, we might end up needing a new calendar resetting y2007 as ground zero.
Personal musings as usual ...
CMR Price at posting:
30.5¢ Sentiment: LT Buy Disclosure: Held
