deflation and values of your coins

CLASSICS

i just caught a story about deflation on the news today, and one of the big stories is about the ecomony in japan, and thier banking system. deflation has taken hold on just about everything, and prices are coming down, some items by 50 per-cent or more. they say they need a complete banking system overhaul, as their ecomony has been in the pits over the last 5-10 years. the word was they could become the next enron of the asian banking world, and it could have extreme effects on our banking system, money, and everyday way of life as we know it. what do you think if that does happen, or something like that would happen here, and how would it effect your collecting, or the value of the items you now have. since prices would be going down, would you add to your holdings, sell off while you still have some value, and hope you could buy them back at cheaper prices, or just sit thight, and see what happens.

ClausUrch

I believe this has happened at least once (most recent 1989) and will more than likely happen again. The usual will take place; the "little guy" (investor and dealer) will get the screws while the big one will be bailed out. Kinda simplistic but it boils it down to the lowest common denominator.

I would probably hold on to what I have; provided I didn't need the funds to pay the mortgage,etc.

coppercoins

The way I see it, everything is relative. A $1 Coke cost 40 cents in 1980, and a nickel in 1955. Minimum wage, at nearly $6 now was $3 in 1980, and much less in 1955 (dunno, what? a quarter?) Anyhow, the prices and wages are relative through time.

If prices deflate, it's likely our economy will follow and wages will decrease. If you make $20 an hour now, and spend $3 on milk, what's the difference between that and making $10 an hour and spending $1.50 on milk? It's still the same percentage of your wages to have your moo-juice.

I probably have it all wrong, I'm a computer programmer, not an economist. There are likely a number of facets to this that I'm missing. Set me straight.

nwcs

Hey, I didn't realize you were a programmer? What's your specialty?

Yeah, most people forget to factor inflation into everything. Especially when comparing monetary values over time.

coppercoins

I don't specialize in much, but I do Java (web-edge) for a living. I am a free lance web developer working with PHP, DHTML, Jscript, some Perl, and MySQL. I am about 20 credits from graduating with a degree in CIS, internet applications development with a 4.0 average.

nwcs

Ahh, you remind me of me 7 1/2 years ago. Have you looked into .NET? I've been programming with it for 1 year next week. C# mainly, doing enterprise development. It's really a great environment. Java was fun, too. Spent a year and a part with it. Both good environments.

Neil

coppercoins

I haven't had time to get into the newer stuff yet, pretty much just doing what I know while going o school learning what they want to feed me. My degree will include some study in JSP and ASP, but that's about as far advanced as it gets for now, unfortunately. Once I have time (after graduation) I intend on looking into the newer and more advanced stuff on my own.

jtryka

I seriously doubt that we would see a deflationary spiral like Japan in this country. There are too many differences. Yes, we both have a fiat currency system which to me is anathema to deflation by definition, but we are also the world's biggest debtor, and we have the largest trade deficit in the history of the planet. Despite Asia pumping billions in cheap goods into our economy, eventually the dollar will weaken, and the prices we pay would adjust. Would I take a 50% hit on my coins and still be able to sell them and pay for a nice new car or house, sure! But realistically, I don't see that happening. The only area of big concern to me is if the housing market bubble pops like the Nasdaq, then I am convinced we are in a depression that would make Herbert Hoover cringe! Then all bets are off.

JD

I live in Japan (Tokyo) and buy coins here. I'd call it selective deflation. Sure, vcr's, digital camera's, computers are much cheaper but the everyday stuff such as milk, bread and produce is the same or more than it was three years ago. The country has several very large issues, the three biggest are: 1) banks carry a lot of nonperforming loans and refuse to give out new ones, 2) land prices have been falling every since the bubble burst...but then you could also argue they were artifically higher then than they should have been, and 3) the population is aging at a faster rate than kids are being born & the country has very strict rules on allowing foreigners in to work. So, in essence, it's a dieing country. As for coins, most Japanese gold and silver coins are overpriced by anyone's standards...just check the prices on Meiji era gold. US coins in any condition are highly sought after and sell for a premium. Brittish coins are undervalued compared to England. Most everything else you pay a slight premium for...it's the "import" cost, so 'm told. I've recently seen a lot of semi-rare stuff that was originally bought during the bubble for two/three times the current asking price but even at the current price it's no bargin. Although when the yen drops into the 125-130 range then some good deals can be had. So, if you're a collector I'd say deflation hurts the seller more then it helps the buyer. If you're a dealer I'd say it doesn't really matter (unless you're holding on to a large inventory) because you usually work on a spread anyway. Just my thoughts.

cladking

It seems unlikely that deflation could occur in this country without severe
recessionary forces at work. This seems improbable but if it does happen
the value of the dollar will not be peoples' primary concern

DesertLizard

Japan has been in a funk since 1990 when their stock market hit 40,000. Today it rests at 8,700 and it's STILL overpriced.

Real estate has come down alot but it's STILL overpriced by 50% according to some.

As someone mentioned earlier banks hold trillions in non performing loans. Only interest being paid on trillions more. They don't dare foreclose because the assets are worthless and it would cause more failures.

Back in 1984 the yen was at about 450-470/$ today it sits somewhere around 120/$. Interest rates for years have been around .5%-2% on 4-5 yrs CDs!

Can't happen here?! Think again. Personally I rather be owning coins, bullion and treasuries versus any stock and especially NO NO NO real estate.

My biggest concern is how long the decline will last not IF or WHEN it will come.

Trime

Right now , we are working on a war economy with the prosects of 100s of trillion $ war looming on the horizen. In contrast the economy has not recoverered and the real estate market is over valued. We are again in a negative trade balance.So.. it is a really hard time for economists to make accurate forcasts. My guess inflation first and then if the economy can not work its way forward the risk of more serious deflation. The latter is really bad guys!

baccaruda

deflation is a particularly ugly scenario for people with large amounts of money on credit (farmers, homeowners, landlords). The original value of the loan and the high interest rate remain intact while those same dollars they pay are now worth MORE than they were. Factor in that the interest rate is accounting for the fact that future dollars will be worth LESS than the present and it's makes those payments very tough.

gold and silver holders take a big hit also.

CharlieB

I am thinking the same way as coppercoins on this, maybe lower
wages but also lower prices. But I do know my 1856 FE has
survived the post Civil War period, the financial panic of 1893,
WWI, 1929 crash, the depression, the Kennedy 1962 period,
the long 1973-1974 recession, 1987 and the 2000 tech bust.
Somebody tell please, why are things different this time
after 146 years?

wallstreetman

My Gold sure isnt having any deflationary problems!

hookooekoo

deflation is a particularly ugly scenario for people with large amounts of money on credit

Yea, I remember being taught the flip side of that in high school, that Inflation if GOOD for debitors because it should make it easier to pay their debts.

michael

well all i gots to say is ........................... RICHES ARE THORNS.............................................



sincerely michael

clackamas

If the US experienced deflation we would be in a depression. Japan's banks have been abnkrupt for the last 15 years by US standards and world standards for that matter. Before the US ever got in this situation you would know things were getting bad well before deflation actually hit. If you saw gold @$800 again, watch out.