Maybury Issues Inflation Alert

Richard MayburyRichard Maybury describes himself as “The 2,500-year old man,” referring to his deep study of history (economic & otherwise) and how it repeats today.

Back in December Mr. Maybury warned the current deflationary environment would soon flip into a strongly inflationary one [Deflation Xforming to Inflation Soon]. At that time he said, “In any case, when I think the bottom has happened, I will let my subscribers know on the Subscriber Access part of our web site. No guarantees, but I’ll do my best to get it right.”

Yesterday he issued the alert. [Read full text here.]

He says, The bottom of the deflationary stage of this crisis has arrived. However, it is not an unqualified call to buy every non-dollar asset you can get your hands on.

“As you know, US officials plan to force taxpayers who pay their debts to subsidize those who don’t. This is diverting flows of money, creating larger profits in some areas and larger risks in others. There are colossal opportunities now, but also traps.

“I believe it is highly likely the world is entering the worst economic crisis since the fall of the Roman Empire. Never before in 2,500 years of economic history have people gone through this kind of situation with a world reserve currency that was fiat paper, not gold. We’re trying to ride out an 8.0 earthquake in a house built on sand.”

Subscriber Only Details
As the details are only for subscribers of Mr. Maybury’s excellent Early Warning Report I’ll only summarize it here. Five specific events in March persuaded him to call the bottom. 

1) March 23, 2009. China’s central bank governor said the US dollar should be replaced as the world reserve currency. That was the most powerful attack yet on the dollar’s credibility. (China is the largest holder of US dollar assets.)

As foreign holders begin to question the dollar’s viability they will try to dump their greenbacks. Lots of things inside the US are at fire sale prices, so, as these foreign greenbacks are shaken loose, money will flow into the US to buy those bargains. This will increase the money supply in the US, adding to the Federal Reserve’s own inflation of the money supply.

2) Increased fear of the dollar will also contribute to a rise in velocity, both inside and outside the country.

3) March 20th, 2009. At the Independent Community Bankers meeting a Bernanke squeeze doll was handed out, and Bernanke was the target of ridicule. The only thing backing the fiat paper dollar is the credibility of the US central bank. When foreigners see the Fed’s own banking community jeering the Fed honcho, the loss of confidence in the dollar will worsen and contribute to a rise in velocity.

4) March 18th, 2009. The Fed announced it will purchase billions of dollars of mortgages and government bonds. This will inject more new dollars into the financial system, and direct hundreds of billions of them into real estate. The real estate bubble will be re-inflated. [See Dollar Death in May?]

5) Orders for big-ticket durable goods, new homes and existing homes have risen recently. This shows that money is on the move and flowing back into some of the largest sectors of the economy.”

Mr. Maybury thinks for several months we will experience more of a U-shaped bottom than a V-shaped bottom.

For a while, a lot of money may leave the more liquid financial investments such as stocks, bonds and CDs, and flow into real estate. The beginnings of the new real estate bubble could be accompanied by a further deflation of stocks, bonds and perhaps even commodities.

In short, the re-inflation of the housing bubble could be so intense that it will suck money out of the financial markets.

Mr. Maybury expects the first incident in the coming inflationary crisis will be a global monetary disaster, with the dollar plunging in international currency markets.

Conclusion
Mr. Maybury recommends an assertive strategy to take advantage of the opportunities the inflationary trouble generates.

He is currently buying gold, silver, platinum, specific silver mining stocks and a specific solar energy company that he pegs the risk at 2.0 or less – and the three-year profit potential of 1,500%. (Subscribe if you want more specifics.)

And I love the way Mr. Maybury closes his special alert, “You are on my mind constantly, and I am doing all I can to help you stay safe and prosperous.”

See also:
Inflation, Intervention & Velocity of Money

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8 Responses

  1. Inflation or deflation?

    Look for both… it depends upon which asset/good we are talking about. Autos/real estate/stock market (soon) are deflating whilst many others are inflating petroleum/food/commodities. Expect violent fluctuations in both sectors with deflation ultimately prevailing despite all the fiat printing. This time span is unpredictable as ‘unforeseen’ events may favor either inflation or deflation or both simultaneously (war/WMD attack/pandemic virus/geological event(s)/etc.).

    When this process ends (timing?) deflation must prevail if the U.S. & the rest of the world expect to reach a position where positive growth can begin. I say deflation for the bad paper everywhere will have to be put on the table & valued by Mr. Market… expect chaos in resolving this, however, no real economic progress can occur until the economic sins of the past are expunged.

    Meanwhile, the U.S. & the rest of the world will be riding for a trip over a financial/social/political Niagara Falls.

    We live in an interesting world…

  2. Deflation.

  3. What silliness. I like Maybury but I think his thesis is wrong. Answer one question- with hundreds of thousands of job losses every month with no end in sight how is it that ‘velocity’ will increase. People without jobs spend less. The printing that Bernenke has done to buy our own bonds..these dollars are in a vault (Metaphorically) and are not in circulation, at least yet.
    As long as the USD remains the world reserve currency, talk from China and Russia aside about its replacement, its unlikely that the inflation that is referred to here will occur.
    What we’ll have is a continuing deflation in asset values and at some point food stuff commodities will probably rise in price. The worst of both worlds.

    • Velocity is difficult to measure. Although my income is down 14% year-to-date, I know that I have increased the velocity of the currency that I do have. When I get income in, I have been buying goods that I will need in the future. If the recipients of my currency likewise turn it over quickly, then velocity of my smaller income has increased.
      .
      The current slowed down velocity has offset the increased money supply. When the velocity increases to normal, or through fear beyond normal velocity, then the vast increase in supply + velocity will have it’s inevitable result in inflation, IMO.

  4. Scott,

    What does this mean? Does this mean DB registered yesterday to take delivery of 850,000 oz. of Au?

    I just want to know if I’m reading it correctly. Thanks.

    http://www.cmegroup.com/trading/energy-metals/files/delivery.pdf

  5. Funny…Professor Fekete (also a PM bug), is predicting the exact opposite of Maybury- i.e., severe, crushing deflation.

    http://www.financialsense.com/editorials/fekete/2009/0330.html

    What’s coming – hyperinflation or hyperdeflation? I don’t think anybody knows.

    • Cornholio,

      And Fekete is a smart feller too. Funny thing with this deflation though, compared to last fall I’m paying more for gas, more for a lb of hamburger, cat food’s NOT cheaper, Tropicana OJ is higher. Now, of course, cars are cheaper. Seems like the stuff you NEED is still going up while the stuff you DON’T NEED is going down.

      • Scott,
        Very good point!!!
        That should be enough to convince everyone that we are actually in an inflationary environment. Items of everyday use are going up in price. The deflation-talk is coming out of Obama’s B***S*** production company.
        Buy gold and silver while they are still cheap. KGC and AUY are the favorites in the gold sector while SLW is the hot stock in silver. NXG a minor gold miner is rated the highest by the CAPS community in Motley Fool.

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