COVERITLIVE.COM

12:25

Mick Weinstein - Hello everyone, we'll begin in a few minutes.

12:28

Mick Weinstein - The live discussion will have two parts: (1) I'd like each of the panelists to briefly weigh in on the Krugman/Laffer debate that I linked to above: Is hyper-inflation on its way in the US?

12:29

Mick Weinstein - (2) Then we'll turn to the question of how your are bracing your portfolio(s) for inflationary risk.

12:29

Mick Weinstein - I'll enter questions from our readers periodically

12:30

Mick Weinstein - Readers, you can enter your questions in the box below this one - we'll monitor them and enter some to the discussion.

12:31

Peter Schiff -

so do we comment by typing an not via telephone?

12:31

Mick Weinstein - that's right, Peter

12:31

Peter Schiff - OK

12:31

Scott Grannis - I think both Laffer and Krugman are exaggerating; we're not yet headed to hyperinflation, but we're not mere inches from the abyss either.

12:31

Mick Weinstein - thoughts on that, Peter?

12:32

Peter Schiff - I think hyperinflation is a worst case senario, but I agree with laffer that high double digit inflation is inevitable.

12:33

Mark Sunshine - I don't think that Laffer is correct in his analysis.

The numbers don't suggest that the Fed is "printing money" or debasing the currency.

There is always an inflation risk if they blow it in the future but for right now I am not too worried.

M1 is actually down a little since 12/15/08, M2 is only up marginally and M3 (if they still published it) would be down.

The US as a nation is borowing less today than we did a year ago (the net betweeen private and public borrowing) because the saving rate is up and private borrowing is down. The amount of decline in private borrowing isn't being offset by the increase in public borrowing (that was in the recent Flow of Funds Report published last week by the Fed).

Excess funds and the size of the Fed balance sheeet are increasing but the Fed is now paying interest on deposits and there was a gross shortage of US$'s in the world at 12/31/08.

12:33

Peter Schiff - gald that Art has come around to my way of thinking, even if he still has not paid me my penny!

12:33

Scott Grannis - I'm not sure how high inflation will be, but I do think it will be higher than the market expects. TIPS spreads show that the market is expecting inflation to be about 2% forever. I think it could easily be much higher.

12:34

Peter Schiff - the shortage of dollars will turn in to a glut very quickly, just like it did with houses

12:35

Peter Schiff - TIPS are worthless indicators as the CPI in bogus and anyone really concerned about inflation knows this.

12:35

Scott Grannis - I think you worry about inflation when market prices point to an oversupply of dollars relative to the demand for dollars. We now see that: 1) a weak dollar, 2) gold near $1000, 3) almost all commodities are rising, 4) the yield curve is steepening at the long end.

12:36

Mark Sunshine - The Chinese Central bank govenor published an interest piece that suggested that the Fed is suffering from what is known as the "Triffin Dilemma, i.e., the issuing countries of reserve currencies cannot maintain the value of the reserve currencies while providing liquidity to the world, still exists."

I think that a lot of analysts don't understand that concept and are mistaking what the Fed is doing.

12:36

Scott Grannis - The CPI is lagging indicator, to be sure, but I wouldn't say it is bogus.

12:36

Mark Sunshine - As for Peter's point that there will be an oversupply of dollars, according to the BIS the amount of shortage of dollars in the EU banking system was a little north of $2 trillion.

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