What’s happening now is at best des-inflation but certainly not indicative of deflation, refers the analyst, adding that the official figures for the consumer price index in the United States could be wrong because the methodology was “massaged” in the Clinton Administration. We can compare the official numbers with the Shadow Government Statistics – there’s a big gap (the alternate ‘shadow’ number refers 5pc inflation for the US).

Adrian pointed out recently that in less than one year since the fear of deflation gripped the world, the FED chairman made his semi-annual testimony to the House and Senate last July and in 2,898 words of the Monetary Policy Report to the Congress the world deflation is not one of them. Deflation just “deflates” from the political discourse.

Adrian, 52, is the founder of 2000 of InnovoMark – Innovative Marketing, specializing in pricing, commercial tendering and marketing training. He has developed a unique algorithm and methodology for analyzing financial futures markets, a technique he named Market Force Analysis.

THE NEXT BULL MARKET: «I expect the stand out mania sector will be natural resources and “killer application” will be precious metals. I believe it will be the biggest bull market ever in history. »

Interview by Jorge Nascimento Rodrigues ©

QUESTION: Just last week, FED announced the July statistics for the monetary aggregates M1 and M2, and the incredible acceleration of the quantity of money fueled by the anti-crisis packages. How the FED could talk of a deflation risk? What was the main operational objective of the deflation double-speak through 2008?

ANSWER: The system had become overleveraged. The straw that broke the camel’s back was defaults in the sub-prime mortgage sector but this dominoed through the system due to financial engineering (read wizardry) have daisy-chained many different parts of the economy together due to complex derivative instruments. The most at risk were the US banks and so as massive liquidation started the panic of the FED and the Treasury was not for the American people but for their crony banks and as a consequence the whole fiat money scam. It was absolutely essential, as explained in a recent article, that as banks failed and people rushed to get their “money” out of the banks that no one should be refused their paper. The overleveraged banks had no liquidity nor in fact solvency. They had to have access to the printing machinery of the FED but there had to be a credible pretext for allowing it without the whole world suddenly seeing that the US had become Weimar Germany overnight. In other words if there is a lack of money to meet obligations, just print it. The only way that emergency authority could be given to provide massive influx of more fiat [money] to satisfy the immediate needs was to create a deflation scare. A scare that the world economy would come to a halt and that we faced an imminent and dreadful Armageddon like never seen before. With this cover story the Congress and the people could be made not only to accept the promiscuous money creation but to beg for it and cheerlead it and believe that there could be no chance of inflation if it was deflation that was the dragon that was being slain.

QUESTION: Can we say that the deflation spin operation was the biggest lie of this recent Great Panic?

ANSWER: Yes, it was the biggest lie of the recent Great Panic

QUESTION: Anyway official figures refer slight deflations in the US and Europe. (Consumer prices in America slipped by 2.1pc in the year to July, according to official data released yesterday. It coincided with Eurostat figures showing that the Eurozone’s consumer price index dropped by 0.7pc in the past year, compared with deflation of 0.1pc in June.). Or we must get rid of these numbers?

ANSWER: We know that the CPI (consumer price index) is so politically massaged and altered but even if we accept it the drop in general price level is almost within the noise level of the measurement. It is at best des-inflation but certainly not indicative of deflation.

QUESTION: As vampires need blood, stock markets need a sector that can fuel the animal spirits of investors and traders. Dot.com crashed in 2000, flash trade and high frequency trading probably will stop this semester, energy and clean tech stocks apparently (despite also Chinese big efforts) do not re-take off. Which sector can be the future “killer application”, the candidate for a new bull market?

ANSWER: I think many sectors will gain in nominal terms as stocks will be bought as an escape from holding depreciating fiat money, but only a few will gain in nominal terms and real terms. I expect the stand out mania sector will be natural resources and “killer application” will be precious metals. I believe it will be the biggest bull market ever in history.

QUESTION: Regarding the Chinese strategy in natural resources around the world, do you think they are well positioned to lead that bull market? And the fact that China is today the first gold miner of the world, what kind of impact will have in the world economy?

ANSWER: China’s growth is prolific. In July they reported oil imports that were 42% above July 2008. They imported 4.7 Mbbls/day. This is also their highest import volume significantly above the previous peak of 4.2 Mbbls/day in early 2008 that China watchers claimed was just inventory building ahead of the Olympic Games. China needs to spend its accumulated surplus to first of all divest of it before the dollar becomes worth a lot less and secondly to provide fuel to their own development which will at some point be sustainable without American consumerism because the Chinese will become consumers. But I am skeptical that China is the world’s biggest gold miner. I think it is a smoke screen that no one in the main stream has seriously analyzed including the so called experts at GFMS. However, I expect China will become the biggest gold holder in the world. It is already destined to surpass India as the biggest gold importer next year. This will of course make them a very rich and powerful nation just as the US was after WWII.

QUESTION: In what circumstances can we have in the United States a remake of a hyperinflationary scenario à la Weimar? Do we need also specific geopolitical conditions, and not only technical financial flaws?

ANSWER: We already have the scenario in place…it is the fact that the $US is the world’s reserve currency. As confidence is lost in the future purchasing power of the $US and the United States ability to repay debt there will be a massive tsunami of foreign held dollars that will come crashing back on US shores. It is a ticking time bomb.

QUESTION: Do you think the Eurozone will follow the ups and downs of the US situation, or the euro has a way out of this mess of its own?

ANSWER: The excesses seen in the US are not as extreme in other countries. The 1.4 Quadrillion dollars (of notional value in 2008) derivatives market was a US tool to suppress the price of raw materials and interest rates. The unwinding of this monster will bring destruction to the dollar. Although other countries have been creating liquidity at a fast pace it will be dwarfed by the dollar flood making other fiat currencies relatively more attractive than the soon to be hyperinflated dollar. The US has become the world’s consumer with less and less exports. This has only been sustainable because payment could be made and accepted in a currency the US manufactures. Once the US currency is no longer accepted their function as a consumer goes from desirable to pariah status. Other countries who have acceptable currencies or desirable exports as payment will replace the US as the world’s consumer. In this respect the rest of the world will recover while the US sinks into a hyperinflationary quagmire like Weimar Germany or Zimbabwe.

QUESTION: Whom you have in mind when you refer “other countries”?

ANSWER: Canada, Australia, Brazil, Japan, South Korea, the Gulf Countries and maybe one day Russia.

QUESTION: In the recent stock market rallies from March what has been more important: the Wall Street flash trading from traders or the contagion from Chinese stock market frenzy, where 20pc of fresh credit from the Keynesian Chinese government package has ended up?

ANSWER: I think there are two different dynamics going on. American markets are seeing the early signs of inflation just like Zimbabwe had the best performing stock market in the world in nominal terms. The depreciating dollar is going to trump company specific fundamentals. I think there will not be another market nose dive like 2008 until the inflationary bust in a few years time when the dollar gets close to total destruction. I think China has more sustainability. You mention “Keynesian Chinese government package” but China is in a position to do this. They are spending their savings. I see nothing wrong in using a “rainy day” fund to kick start the economy, provided it is spent on the right things and not wasted. The US is spending trillions when they were already trillions of dollars in debt! There is no way the US can generate enough in taxes to pay for the stimulus…it should have come out of savings but the US government doesn’t have any. They are broke.

QUESTION: Most analysts consider the Chinese import dynamics of last months, fueled by the blitz in domestic investments (including green strategic ones and infrastructures), the engine of global recovery. Is this sustainable?

ANSWER: If the Yuan is allowed to appreciate faster this will slow down the stock market bubble formation. It is not all plain sailing in China but I think their massive industrialization will not be derailed. Their economy is biased toward wealth creation and not consumerism for the sake of it, so in this respect I think they have a strong chance of becoming the growth engine of global recovery. Their influence is likely to derail the Western banking cabal and move away from a dollar centric currency system for international trade to one which is multi-national. Their liberalization of the gold and silver markets in China for citizens may mean they could eventually move to a PM backed currency but that will be many years away in my opinion.