It's coming

I called for hyperinflation last summer. It didn't pan out. Just as commodity prices were rocketing through the stratosphere, the great deleveraging began. Holders of real estate and stocks sold off and held cash. This is deflationary. I am certain it is temporary.

When the deleveraging ends (DOW at 4500, median home price at 2.5 xs median income) and we are on our 5th or 6th round of bailouts and stimulus, things will begin to creep up.

I'm watching the 10 year Treasury yield. The Treasury is having some trouble selling it's $2.5 trillion shit sandwhich in $33 Billion dollar bites. This means they have to offer it at a discount. When the price of bonds fall, the difference between their purchase and par value increases. This translates into higher yield. When the yield gets above 3%, I am treating it as a signal to buy gold coins (on the downtick).

So what's so bad about high inflation?

Here's how it goes down:

1) Prices, probably commodity and agricultural goods end their see-saw and start reflecting a permanent upward trend.

2) Within6-12 months, commodities double.

3) In the mean time, the economy worsens due to the interventions of the Keynesians.

4) With staggering unemployment 12-15%, there will be HUGE political pressure to end the "price gouging".

5) Government will insitute price controls on gasoline and certain foods.

6) Price controls will eradicate the profits in these industries.

7) There will be shortages. Shortages will lead to civil unrest. Government will blame "hoarding".

8) Businesses will lobby congress to enact wage controls to keep their costs down. Some businesses will get what they want, others (who have no political clout) will be nationalized.

9) A black market will evolve, rendering the price control mechanism meaningless.

10) With its prestige at stake, government will launch an assault on the illegal underground market.

11) We will devolve into a surveillance state. Prison populations will swell. There will be more unrest. More arrests. More unrest. More arrests. etc, etc.

Get ready. It could be a WILD RIDE ahead.