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Wealth Destruction Implies INFLATION |
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Tuesday, 15 March 2011 08:39 |
 For days I've been listening to the talking heads discuss the global economic impact of the disaster in Japan. Jim Cramer is on CNBC right now echoing what everyone else has been saying -- the "demand destruction" from Japanese consumers and industry is a deflationary catalyst. Are these people completely stupid? Let's look at what has happened in Japan: a 9.0-magnitude earthquake, 25 foot tsunami, and nuclear meltdown has destroyed hundreds of billions or possibly trillions of dollars worth of actual, physical wealth -- real stuff that if you dropped on your foot it would hurt. Meanwhile, the Bank of Japan is printing up trillions of yen -- fake stuff that has no real value. Moreover, the BOJ, heretofore the 2nd largest buyer of U.S. Treasuries in the world, will likely not be buying more American debt anytime soon and will probably be selling it, prompting more "quantitative easing" from the Federal Reserve -- again, fake stuff of no real value. Then add on top of that a critical piece of the global supply chain is shut down for the foreseeable future, decreasing the supply of everything from Toyotas to iPhones. Thus, we have much MORE money being created, chasing far FEWER goods. In what universe does that portend lower prices? If anything, this "black swan" will be a catalyst for the global currency collapse and hyperinflation, not deflation. You would do well to consider any panicked sell-off of precious metals and other real things an excellent and possibly last real buying opportunity.
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Last Updated ( Tuesday, 15 March 2011 09:29 )
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