There's this pesky thing called inflation, I realize now's not the time for it, but over 30 years, every 1% can kill your portfolio of (fill in the blank)... Holding on the barge in the long run means loosing....
@ProofCollection I agree, not much capital goods, a few big orders would turn it around, it is the labor side that's oversupplied, but that's the fundamental shift in our economy over the last fifty years. That's why someone with a bigger pocketbook has to step in to create demand for the labor.
Another trend in the labor side, is yields, ie productivity, is dramatically increasing. I believe even faster than our stats can account for....
@roadrunner Funny thing about unintended consequences.... we raise the leverage rates for banks and wonder why they don't lend, they we lend them money at 1% and sell them treasuries at 2.7%... pretty good business.. you improve your balance sheet and make money without risk... nice work if you can get it....
<< <i>The Treasury/FED/Big Banks definitely can't print enough money but they can keystroke ANY amount of money they want into existance in any time frame they desire. And by keystroking such liquidity and shuffling it around, it can be effectively hidden. One cannot use the standard Monetary Supply markers anymore as the only means to decipher liquidity injections. The banks got the money first via TARP and other FED programs. They have used that money to further push inflation in commodities, stocks, and bonds. They certainly didn't use that money to help bolster durable goods, home prices, or small business ventures. >>
I'd have to understand this paragraph more before commenting....
I don't believe there's been inflation in stocks... the index hasn't moved in 10 years.....
I always thought commodities were undervalued before the boom. We have a growing population and a population that is getting richer (i.e. china's / india's middle class) and they are looking for the same things we like, washer machines, dryers, cars... all commodity intensive....
Oil, we're near the end of cheap days... yeah 3 bucks a gallon is cheap.... I always tell my son, think of the millions of pounds of dead animals / plankton / plants it took to make this....
Defense 783 B Social Security 738B (paid out of withheld payroll, essentially deficit neutral, plus they have 2B in treasuries they are sitting on... yes they will collect b/c past presidents allowed the slight of hand to lend to ourselves to "lockbox" social security) Medicare 498 B Income Security 567 B (SSI, Veterans benefits, food stamps, federal employee retirement) Medicaid (goes to states) 381 B
So with an aging population, which one of these are getting cut.....
not a chance... we're heading for higer taxes one way or another... maybe a VAT tax, or raising income tax.. plain and simple... and we have the capacity to do it btw...
Good luck getting re-elected if you want to cut the above.....
Countries don't go bankrupt, they print more money and reschedule = INFLATION
(Countries that have that printing press is whom I am referring about)
All the economic talk about, tax cuts for the middle class, another round of stimulus, doesn't make the cut. As they say in golf lingo.
We've GOT to put people back to work in secure well paying jobs. We've lost too much of our manufacturing base, time to get it back! Non- Union and Non-government job base must be improved! It's those groups that get all the bail outs, gotta add the banksters in this group.
Don't get me wrong here, I'm not trying to bash anyone, but I've been in private sector manufacturing for over 20 years and have seen the total demise of this sector.
<<Our abundant resources and economy has cushioned us from the harsher aspects of a currency collapse, but we now have a system that is rife with vulnerabilities in the supply chain, the public health system, home security, national security, the means of production, and the social fabric. >> You sound much like the politicians you criticize.
Lots of scary words, no data or facts to back them up. Everyone's entitled to opinions, not facts
Yup, I just go along and make this stuff up.
Q: Are You Printing Money? Bernanke: Not Literally
My point is to give people an accurate picture of what the size of the project was, not an opinion. Everyone is entitled to there opinions, just not facts.
<< <i> How much of GDP do you think we should eat up in interest payments on the debt? It's at record levels already and still going higher. And that doesn't even include the unfunded liabilities that will ultimately have to be monetized or defaulted on. You know, the little stuff like Medicaid and Social Security - those nagging little details? >>
We are not at record levels of debt vs. GDP, WWII did that for us.....
The US corporate tax is artificially high and does not normalize for deductions that we allow and other countries don't. It's in another post of mine... sorry too lazy...
Low growth causes high debt, not the other way around. That's why Japan has 200% of GDP and the yields are extremely low.
<< <i> Keep in mind that the huge debt is currently being carried at extremely low interest rates which are being held low by bogus purchases from phantom buyers. >>
Please identify / supply more data for the bogus purchases / phantom buyers. I can't comment or speculate otherwise.
A few things: I can't debate you on your term waste, it's an opinion. Why do you say that? I mean it as a serious question, not to troll you.
<< <i> Don't give me your government excuses, it's a government-caused disaster, no way around it >>
Government caused disaster? What are you referring to Bush Bank Bail out or his Detroit Bailout? Or his 500 B in unfunded Medicare prescriptions (if that don't get old people to vote for you, I don't know what will) or his 2 Trillion in wars? Too bad we never found those WMDs we paid 30 M for the heads of each of Saddam's sons, couldn't we just do that with the WMDs
.... I guess I'd call those government dug holes, so I can't disagree with you. Too bad it cost the lives of 4736 nato forces in Iraq and 2071 in Afganistan.
<< <i>
We spent 2 Trillion and don't have the courtesy to get our money back through the Oil in the ground and the minerals in the mountains. At least Britian knew how to colonize back in the day..
but I sure as heck don't need a government chart to tell me whose digging us into the biggest hole we've ever been in because I've been paying for it, and it sure looks like that's not going to change. . >>
right on brother....
So what do we cut in the budget that has an actual impact? Don't say foreign aid, b/c that aint helping the debt. Rememer the old people have to vote you in, b/c kids under 40 don't vote in numbers to make a difference in elections..
Edit: Too bad we never found those WMDs we paid 30 M for the heads of each of Saddam's sons, couldn't we just do that with the WMDs
<< <i><<Our abundant resources and economy has cushioned us from the harsher aspects of a currency collapse, but we now have a system that is rife with vulnerabilities in the supply chain, the public health system, home security, national security, the means of production, and the social fabric. >> You sound much like the politicians you criticize.
Lots of scary words, no data or facts to back them up. Everyone's entitled to opinions, not facts
Yup, I just go along and make this stuff up. >>
I'm not trying to troll you, but I'd like to know how you conclude: "we now have a system that is rife with vulnerabilities in the supply chain, the public health system, home security, national security, the means of production, and the social fabric"
I may agree with you, but I want to hear you out...
my three favorite classes in college were logic, debate and a writing class. (history major, like most around here)
One note, do your children a favor, when a writing class is disguised as "victorian literature" class and the prof has written 4 books on it... it's not a normal writing class...tell them not to take it...
keyboarding was my favorite in high school.....
Edit: I googled "victorian literature" and my college name and she was the first hit. Its been 18 years since I took that class. Scary.
Harley, you are off & running in so many directions that a debate just isn't going to happen unless it's a single point at a time. The question is why hyperinflation won't happen in the U.S.
You give the impression that you don't think $787 billion "stimulus" (actually it was over $800 billion) is a big deal. I say it is. If the total deficit is $13 trillion or so, then $800 billion accounts for over 6% of it - in just a single program in a single year. This is just Item #1 on the list - others will follow...
Let's remember what the debt is - it's the total obligation that the government must pay out regularly in the form of interest payments to bondholders, including China and another new category that was never significant before in any reporting - "households". Out of nowhere, "households" began buying huge gobs of new Treasuries, and this only happened as China has begun cutting back on purchases.
Hence my reference to "phantom buyers". Everybody knows that the "phantom buyers" are the Fed, who is now known to be buying Treasuries en masse. So, let's examine the logic that you desire to be a part of this discussion, shall we? We have a huge expense which you say isn't large, but I say it is - being financed with the issuance of government debt, and that debt is being bought by the private banking cartel (headed by the Fed) with tax dollars that were given to it (in the $800 billion Bank Bailout - Item #2) after it gambled and lost it's own assets. The net result is that tax dollars are being spent to pay off debt that was incurred by bank gambling losses in order to blow it on public works projects that really aren't creating many permanent jobs.
So, the banking cartel is gaining an interest-bearing asset by spending free money (from the Bank Bailout) which was taken from the taxpayers in order to buy those interest-bearing assets which were also created at the taxpayers' expense (in the Stimulus Bill). These two expenses amount to a 12% increase in the debt, in one fell swoop - and the only real beneficiaries were the private banking cartel, aka the large investment banks, headed by the Fed.
For the record - the bank bailout was done under Bush with a Democratic Congress; the stimulus was done under Obama with a Democratic Congress. Paulson was a Goldman Sachs alumnus and a Bush appointee; Geithner is a Goldman Sachs alumnus, a Goldman prodigy under Paulson, former NY Federal Reserve Bank Chairman prior to becoming Treasury Secretary, a tax cheat, and an Obama appointee.
How does any of this impact the potential for hyperinflation? Simply put, it adds to the total of the debt, and the debt has to be serviced. As I pointed out earlier, when interest rates rise (and they will as the market demands higher rates for higher risk), then the interest becomes much harder to keep paying. ON TOP OF THAT, the Medicare and Social Security liabilities I mentioned previously are UNFUNDED, which means that they don't appear in the $13 Trillion total debt. During WWII and after, there was no huge UNFUNDED LIABILITY to be paid. Now, there is. That's the difference between then and now, so the chart you produced is not the total picture by any means. You can bet that the debt will be paid, but it will be paid with INFLATED dollars.
If you think that increasing tax rates can account for paying both interest on the debt AND the HUGE unfunded liabilities coming due, I guess maybe there won't be a big inflationary spiral. Unfortunately, higher taxes tend to completely change a business model in terms of capital requirements and profitability, so good luck with private industry job creation without a reasonable tax structure and don't forget the increased drag on profitability of more bogus regulations and reporting requirements of all sorts. That's a taste of the type of slow growth Japan has been seeing for the last 20 years, after Japan was once heralded as the Asian Economic Miracle.
And THAT is why I don't think that the government will go the high tax/low growth route. I think that the politicians will take the bait of easy money, pump-up consumption via idiotic spending programs and more irresponsible government giveaways - ending finally in a default via high inflation. At that point, anyone whose wages can't keep up, anyone whose fixed incomes can't keep up, anyone whose savings are being eroded - will all spend dollars and exit dollar accounts in rapid fashon. THAT's hyperinflation - a rapid loss of confidence in the currency, and a rational act in response to an irrational economic policy.
We can discuss your other points too, but they all fold into this same situation regardless of who did what to whom and whose fault it was or is.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>we won't have hyperinflation, just a fast shrinking dollar value >>
Any real difference?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>we won't have hyperinflation, just a fast shrinking dollar value >>
Any real difference? >>
No. Same thing.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
There is one thing that the leaders of both political parties in this country share - and that is wealth. One of the reasons the Democrats struggle is that the elected Dems tend to be super-wealthy (Corzine, Kennedy, Rockefeller - even Obama is worth millions due to book sales). So for policies that benefit the wealthy at the expense of the working class, one party supports those policies because they represent that constituency, and the other party may oppose those policies on principle, but if the policies fail then they are personally ok. If the Bush tax cuts on the wealthy are extended, then all our elected leaders personally benefit.
Why that has anything to do with hyperinflation - hyperinflation is the one thing that could undercut the wealth of those leaders, plus the wealth of every CEO of every major US corporation. That's a ton of real power that would be destroyed. Won't happen, because those folks won't let it happen. It is perfectly possible for something to happen that eliminates the middle class and keeps the median real wage trending flat to downward - so it's perfectly possible that some more bad things happen to the economy. It's just that hyperinflation isn't one of them.
I would expect it much more likely that the US adopts a regressive VAT type European system or a regressive Flat Tax, or cuts government spending sending unemployment to 15-20% well before anything hyperinflationary occurs.
Let's say that the Chinese decided to try to sink us and dumped our debt on the market to try to drive up our interest rates and drive up inflation. I would expect three things to happen:
#1 - a buyback of US debt by the aforementioned billionaires and multi-millionaires to partially cushion the blow - the companies can afford it even if the individuals cannot #2 - a massive "buy American" ad campaign which would lead to our industry spinning back up (could happen quickly), an end to our trade deficit #3 - a mobilization for a hot war against China if #1 and #2 weren't enough. They may have some tech that could be used against Aircraft carriers but more bombs would drop in Beijing than in LA, and that would not be something that China would want. But if they did, then the boost to the paper economy from the war would solve many economic problems temporarily.
With the European economic meltdowns in Portugal, Greece, etc., there is no chance any more of the Euro displacing the dollar as the world's reserve currency.
Again - many many bad things can certainly happen in our economy. Realistically, hyperinflation isn't one of them.
-Fred
Successful BST (me as buyer) with: Collectorcoins, PipestonePete, JasonRiffeRareCoins
We've already had our hyperinflation since 1913 and more specifically since 1935. Seventy-five years of near continuous inflation. Something gotta give.
Hyperinflation will not be caused by a political or social-economic event. It will be a result of a currency collapse. A lack of confidence would be the spark.
MJ
Walker Proof Digital Album Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
We are not at record levels of debt vs. GDP, WWII did that for us.....
We backed our debt with gold from 1944 - 1971. Hence the debt incurred back during WW2 could have been settled with gold, a monetary unit that could not be debased or created out of thin air. That's far different than today where our debts can only be transferred to someone else by employing FRN's or TBonds (ie IOU's). In today's world debt only grows since it is never retired because every new piece of fiat is just another liability. Debts are therefore never officially settled, only transferred.
Here is one of the best explanations of Hyperinflation and how it will happen that I have seen. Be sure to click on the "How it will happen" link.
I think the definitions and discussion in that article are great, and I will excerpt them here:
But hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same—because in both cases, the currency loses its purchasing power—but they are not the same. Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena. Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money—they want less of the currency: So they will pay anything for a good which is not the currency.
Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.
Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money—they want less of the currency: So they will pay anything for a good which is not the currency.
<< <i>Please share with everyone your best reasoning for why Hyperinflation won't happen in the U.S.
Mine is: The financial services & investment industry is HUGE. There are TONS of people reliant on the whole system "the way it is". Not to mention those in power politically. Tons of 401K money being constantly (mindlessly) pumped into the system buying stocks, etc. Most of the public (95% ?) is totally ignorant as to what may or may not be going on financially with Wall Street, currencies, or commodities, the rest of the world, ect. Busy watching TV. So the public is unlikely to cause a "run" on the dollar/banks. Yes, the US has huge debt. So does everyone else. The way I see it, we are in a global "the emperor has no clothes" situation - but no one - ever - is going to call the emperor on it. >>
Reasons #1 - #100:
Inflation also steals money from the rich and elite.
Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.
Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money—they want less of the currency: So they will pay anything for a good which is not the currency.
These are good definitions to keep in mind. A high rate of inflation can lead to hyperinflation.
However, a rise in prices is not inflation. Inflation is an increase in the money supply, and prices may or may not be affected - depending on the demand.
Here's the kicker - when the Treasury sells bonds to finance ongoing government operations, that debt is monetized by the Fed when the Fed creates dollars in order to buy the debt. At the same time, that new debt adds to the cost of financing the total debt. The growth in the cost of financing the total debt has been increasing exponentially. The problem is that the economy and the tax base have not been increasing exponentially and tax revenues cannot keep up with the spending + the cost of financing the debt.
The math doesn't add up. Eventually, it will. That's when hyperinflation may become reality. It's either that, or a default on government debt. We might live to see it.
Q: Are You Printing Money? Bernanke: Not Literally
if someone really believed that hyperinflation was inevitable, wouldn't the best strategy be to go into debt up to your eyeballs, buy income producing stuff (positive cash flow real estate, businesses, etc) and then just pay back the loans with all those extra zeroes you're going to get paid when the prices of everything go up?
if someone really believed that hyperinflation was inevitable, wouldn't the best strategy be to go into debt up to your eyeballs, buy income producing stuff (positive cash flow real estate, businesses, etc) and then just pay back the loans with all those extra zeroes you're going to get paid when the prices of everything go up?
If hyperinflation were inevitable, you would want to borrow heavily and to buy real assets. Some businesses might be good, some not. It depends on whether or not they stay in business while their customer base is decimated by hyperinflation.
Then again, nobody knows what our congress and administration are capable of if such an event were to occur. They seem fine with bailing out some entities, but not others. It depends largely on your political connections. Not good for most people.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>#2 - a massive "buy American" ad campaign which would lead to our industry spinning back up (could happen quickly), an end to our trade deficit >>
I believe this happens in a Tom Clancy novel for whatever that's worth
Geez, this is a debt based "economy", didn't you guys know you can SPEND your way out of debt, and all is well?
What is so difficult about that?
More spenders (mostly of money they never earned) pop up every day as the real savers watch the 0.01% interest paid on checking accounts up to $500,0000 to see there savings stagnate.
If you can't beat them join them, so spend away and we will fix this minor inconvenience right away, together, because that is how we roll!!
America is different in that as a whole it practictes blind faith in aworld they have no concept of and will be triumphant.
Inflation yes, hyperinflation no. The US has never experienced hyperinflation, the Gret Depression saw massive deflation. If you have cash to purchase income assets such as rental properties, businesses I would do it.
I see interest rates increasing, government going after more tax money, and more dollar devaluation. Gold/silver is a hedge against confidence. Be diversified, save currency for that cash purchase asset.
Inflation yes, hyperinflation no. The US has never experienced hyperinflation, the Great Depression saw massive deflation. If you have cash to purchase income assets such as rental properties, businesses I would do it.
I see interest rates increasing, government going after more tax money, and more dollar devaluation. Gold/silver is a hedge against confidence. Be diversified, save currency for that cash purchase asset.
For the sake of the debate, let's explore this a bit. Let's say you buy a rental property with cash for a good price. If a massive deflation did occur, many more people will lack cash which means that some tenants might not have the rent in about 8 months or so. All of a sudden, your great rental property is losing cash every month, in an environment where cash is king.
So you've spent a chunk of your cash reserve, and now taxes are increasing to boot. And if the massive deflation then turns into high or hyperinflation, the dollar is then losing purchasing power rapidly, you are now being taxed more on fewer (and cheaper) dollars, the value of the property is crashing and your tenants aren't paying. But you are still paying your new mortgage note (albeit with cheaper dollars). So, you are throwing bad money after bad at that point.
I'd make sure that you really wanted the property before buying anything. Cash flow is always very important.
Q: Are You Printing Money? Bernanke: Not Literally
I don't claim to have a crystal ball or actually know what is going on in the Economy, so I have a tendency to watch other people. I like to see what the Big Boys are doing in this market. This gives me a clue to future results and such.
Hmmmmmm.
Soros has has recently sold off over 1 million shares of JP Morgan/Chase, Citi and Goldman (banks).
Paulson (Hedge fund: Paulson and Co) has also dumped 14 million shares of JP Morgan/Chase. He also dumped all of his position in Family Dollar and Sara Lee. Those two are certainly consumer oriented.
Buffet (Berkshire Hathaway) has pulled back their position in consumer stocks by over 20% (Johnson and Johnson, Kraft, Proctor and Gamble). They also dumped their position in Intel.
So, looks like the big 3, as I call them, do not have the confidence in the consumer or banking sectors. This tells me that they want cash. Preparing to buy when prices drop like a rock some day off in the future. Now this has happened since the first of the year (2013). What do they see that we don't? Or do we see it, too?
Looks like the above would indicate heavy inflation and another round of banking and mortgage fiascos.
bob
Registry: CC lowballs (boblindstrom), bobinvegas1989@yahoo.com
<< <i>Inflation yes, hyperinflation no. The US has never experienced hyperinflation, the Great Depression saw massive deflation. If you have cash to purchase income assets such as rental properties, businesses I would do it.
I see interest rates increasing, government going after more tax money, and more dollar devaluation. Gold/silver is a hedge against confidence. Be diversified, save currency for that cash purchase asset.
For the sake of the debate, let's explore this a bit. Let's say you buy a rental property with cash for a good price. If a massive deflation did occur, many more people will lack cash which means that some tenants might not have the rent in about 8 months or so. All of a sudden, your great rental property is losing cash every month, in an environment where cash is king.
So you've spent a chunk of your cash reserve, and now taxes are increasing to boot. And if the massive deflation then turns into high or hyperinflation, the dollar is then losing purchasing power rapidly, you are now being taxed more on fewer (and cheaper) dollars, the value of the property is crashing and your tenants aren't paying. But you are still paying your new mortgage note (albeit with cheaper dollars). So, you are throwing bad money after bad at that point.
I'd make sure that you really wanted the property before buying anything. Cash flow is always very important. >>
I don't believe the FED will ever let there be a shortage of cash or credit. While there may be a reduction in jobs, wages are guaranteed a minimum payout. Fortunately wage laws prevent minimum pay from being set by market forces and only jobs are at the mercy of the market.
I personally believe stagflation is in our future.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>I don't believe the FED will ever let there be a shortage of cash or credit. While there may be a reduction in jobs, wages are guaranteed a minimum payout. Fortunately wage laws prevent minimum pay from being set by market forces and only jobs are at the mercy of the market.
I personally believe stagflation is in our future. >>
It's not a matter of the FED "letting" something be or not be. At some point the fed will lose control, and then hyperinflation will ensue.
People need to understand why hyperinflation occurred with other currencies in the past. It wasnt because those central banks printed more currency, but rather the reasons why those countries printed. Does anyone see those reasons occurring in the USA?
Hyperinflation will happen. My theory is that in the long run all fiat currencies go to zero. We are at 1973 and counting to 2013 or 40 years so far. With all that, hyperinflation may be a relatively minor concern, because as I have written many times, it tends to be large scale historical events that trigger hyperinflation in a major economy.
Again, the big four events that can cause a major currency to go to zero: revolution or civil war, loss of a major war, major famine, major plague. When talking major, figure 10% to 25% of the population as short term casualties. Sane folks will not be counting their money when people are dying left and right. Major powers and their currencies don't fall by inertia, they topple, and it tends to take a huge catalyst to make it happen. For those stockpiling ammo, water, and food, keep in mind, when it hits, the local area may become uninhabitable, and all those stockpiles will have to be left behind if a person wants a reasonable chance to survive.
"let's explore this a bit" or further. You assume several things:
1) renters will not be able to pay 2) one has spent a "chunk of cash reserves" 3) deflation turns to inflation 4) you have a mortgage to pay, and now can't pay it
If all those "assumptions" are reality or become reality, I agree with your conclusion. However,
1) securing renters that have a very high probability of being able to pay in a downturn is not that difficult. Completed 2) large "chunk of cash reserves" have not be spent. Cash on hand is good. Completed 3) I'm still in the deflation or stagflation camp. No hyperinflation. This is the cat in the birdcage, hyperinflation would eat cash reserves 4) there is no mortgage. Property was purchased with cash, currently rent money is building up cash reserves. Completed
The above facts help to assure a positive strong investment, but hey anything can happen to turn things upside down.
It seems I need to remind some of you that the USD is backed by none other than the "full faith and credit of the US." Does anyone see the full faith and credit of the US declining? What happens when the essence of what the dollar is backed by disappears (because it is backed by nothing than essence), that the value/buying power of the USD would drop precipitously? That would be hyperinflation. Do some of you not see the possibility of declining "faith and credit of the US" given what we are seeing from our government and around the world right now? Does anyone here think things are getting better in this regard?
I can only see the full faith and credit essence evaporating if the USA is taken over by another country or aliens. I dont think either is likely during my lifetime.
And yes, the "value of the dollar" has declined over the past 100 years and the "value of gold" , as well as other assets, has increased for the past 100 years. I see this continuing. However, people will still lose vast sums of money (in any form) if they are invested in blind faith in any asset.
My faith in the US Dollar is firmly supported by Ben Bernanke, Chuckie Schumer, Olympia Snow, Hillary Clinton, John Kerry, John McCain, Henry Waxman, Elijah Cummings, Dickie Durban, Barack Obama, Maxine Waters, Debbie Schultz, Lindsey Graham, Michael Bloomberg, Lisa Murowsky, Diane Feinstein, Joe Biden and Nancy Pelosi.
What could possibly go wrong?
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>I can only see the full faith and credit essence evaporating if the USA is taken over by another country or aliens. I dont think either is likely during my lifetime. >>
You have more faith in the clowns that run Washington than I do...
<< <i>It seems I need to remind some of you that the USD is backed by none other than the "full faith and credit of the US." Does anyone see the full faith and credit of the US declining? What happens when the essence of what the dollar is backed by disappears (because it is backed by nothing than essence), that the value/buying power of the USD would drop precipitously? That would be hyperinflation. Do some of you not see the possibility of declining "faith and credit of the US" given what we are seeing from our government and around the world right now? Does anyone here think things are getting better in this regard? >>
The USD is NOT backed by faith and credit of the US government. They are not US Notes, they are Federal Reserve Notes. Its only backing is another party's willingness to accept it as payment.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>I can only see the full faith and credit essence evaporating if the USA is taken over by another country or aliens. I dont think either is likely during my lifetime. >>
You have more faith in the clowns that run Washington than I do... >>
You and Jmski are obviously placing your faith with the wrong people. My faith is with the American People, as an entity. The USA populace, sans about 1000 elected officials, are a force to reckon with.
<< <i>Hyperinflation won't happen in the U.S because there's always someone willing to sell it for less >>
That "lower" price will rise just as fast as the higher prices.
Hyperinflation won't happen as long as slow inflation remains controllable. No different than PM prices.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
"Slow, "regular" inflation is not healthy economic evolution. It is a stealth method of devaluation. In a healthy economy, consumers should not have to change budgets and adapt to slow changes in price. It is this "slow" inflation that required mothers and wives to enter the workforce out of necessity and required further indebtedness. When that no longer satisfied the need for more income, borrowing and second mortgages became the norm to maintain an accustomed lifestyle. The fact that it has slowly taken place is no more acceptable than if it were sudden. Those that accept "slow" inflation have been conditioned to do so. It doesn't have to be sudden to be classified as hyperinflation. If one were to look at the cumulative "slow" inflation, one would be justified to label the sum as hyperinflation. A "slow" death still results in being dead."
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
The US has a lot of wealth and reserve capacity, but we're now over the 50% mark of government dependency. We're importing more government dependents and keystroking more electronic money into the system much faster than we are increasing production in factories & farms.
So far, it's not been an issue in spite of QE. Or should I say, it's not been an issue for most of the people in this forum. What about the record high numbers of - what do they call it now? It's not "unemployed". It's "people out of the workforce who are not seeking work". I forget the official newspeak term. U6? Some are retired. Some are actually disabled. Some are lazy. Some are uneducated. Some are criminals. Some are just down on their luck. The main problem is that gov.com only makes the overall situation worse by killing jobs and making it easy to get handouts and creating all sorts of "special classes". My opinion.
Maybe the fiscal numbers don't really mean anything as long as production output exceeds people's "needs". Maybe "money" can be distributed to government dependents, including corporate welfare recipients for a very long time without consequences. I don't think so, but I could be wrong.
I'm pretty sure that the Keynesian socialists and the Rinos have screwed things up pretty good. We shall see.
Q: Are You Printing Money? Bernanke: Not Literally
Comments
There's this pesky thing called inflation, I realize now's not the time for it, but over 30 years, every 1% can kill your portfolio of (fill in the blank)... Holding on the barge in the long run means loosing....
@ProofCollection
I agree, not much capital goods, a few big orders would turn it around, it is the labor side that's oversupplied, but that's the fundamental shift in our economy over the last fifty years. That's why someone with a bigger pocketbook has to step in to create demand for the labor.
Another trend in the labor side, is yields, ie productivity, is dramatically increasing. I believe even faster than our stats can account for....
@roadrunner
Funny thing about unintended consequences.... we raise the leverage rates for banks and wonder why they don't lend, they we lend them money at 1% and sell them treasuries at 2.7%... pretty good business.. you improve your balance sheet and make money without risk... nice work if you can get it....
<< <i>The Treasury/FED/Big Banks definitely can't print enough money but they can keystroke ANY amount of money they want into existance in any time frame they desire. And by keystroking such liquidity and shuffling it around, it can be effectively hidden. One cannot use the standard Monetary Supply markers anymore as the only means to decipher liquidity injections. The banks got the money first via TARP and other FED programs. They have used that money to further push inflation in commodities, stocks, and bonds. They certainly didn't use that money to help bolster durable goods, home prices, or small business ventures. >>
I'd have to understand this paragraph more before commenting....
I don't believe there's been inflation in stocks... the index hasn't moved in 10 years.....
Nasdaq is down... S&P and Dow about the same..
Market Picture.. Wikipedia.org
I always thought commodities were undervalued before the boom. We have a growing population and a population that is getting richer (i.e. china's / india's middle class) and they are looking for the same things we like, washer machines, dryers, cars... all commodity intensive....
Oil, we're near the end of cheap days... yeah 3 bucks a gallon is cheap.... I always tell my son, think of the millions of pounds of dead animals / plankton / plants it took to make this....
@mrearlygold
I don't there's any evidence this will happen. Simple math, and thats why the market buys treasuries at such low yields....
What's the largest items in our budget..
Visual "heat map" of FY11 Budget
Defense 783 B
Social Security 738B (paid out of withheld payroll, essentially deficit neutral, plus they have 2B in treasuries they are sitting on... yes they will collect b/c past presidents allowed the slight of hand to lend to ourselves to "lockbox" social security)
Medicare 498 B
Income Security 567 B (SSI, Veterans benefits, food stamps, federal employee retirement)
Medicaid (goes to states) 381 B
So with an aging population, which one of these are getting cut.....
not a chance... we're heading for higer taxes one way or another... maybe a VAT tax, or raising income tax.. plain and simple... and we have the capacity to do it btw...
Good luck getting re-elected if you want to cut the above.....
Countries don't go bankrupt, they print more money and reschedule = INFLATION
(Countries that have that printing press is whom I am referring about)
All the economic talk about, tax cuts for the middle class, another round of stimulus, doesn't make the cut. As they say in golf lingo.
We've GOT to put people back to work in secure well paying jobs. We've lost too much of our manufacturing base, time to get it back! Non- Union and Non-government job base must be improved! It's those groups that get all the bail outs, gotta add the banksters in this group.
Don't get me wrong here, I'm not trying to bash anyone, but I've been in private sector manufacturing for over 20 years and have seen the total demise of this sector.
>>
You sound much like the politicians you criticize.
Lots of scary words, no data or facts to back them up. Everyone's entitled to opinions, not facts
Yup, I just go along and make this stuff up.
I knew it would happen.
My point is to give people an accurate picture of what the size of the project was, not an opinion. Everyone is entitled to there opinions, just not facts.
<< <i>
How much of GDP do you think we should eat up in interest payments on the debt? It's at record levels already and still going higher. And that doesn't even include the unfunded liabilities that will ultimately have to be monetized or defaulted on. You know, the little stuff like Medicaid and Social Security - those nagging little details?
>>
We are not at record levels of debt vs. GDP, WWII did that for us.....
% of GDP / Debt
Compared to other countries we have "average' debt levels....
http://upload.wikimedia.org/wikipedia/commons/thumb/b/b8/US_Federal_Debt_as_Percent_of_GDP_by_President.jpg/800px-US_Federal_Debt_as_Percent_of_GDP_by_President.jpg
and low levels of tax...
Comparitive Rates of Taxation
The US corporate tax is artificially high and does not normalize for deductions that we allow and other countries don't. It's in another post of mine... sorry too lazy...
Low growth causes high debt, not the other way around. That's why Japan has 200% of GDP and the yields are extremely low.
<< <i>
Keep in mind that the huge debt is currently being carried at extremely low interest rates which are being held low by bogus purchases from phantom buyers.
>>
Please identify / supply more data for the bogus purchases / phantom buyers. I can't comment or speculate otherwise.
A few things:
I can't debate you on your term waste, it's an opinion. Why do you say that? I mean it as a serious question, not to troll you.
<< <i>
Don't give me your government excuses, it's a government-caused disaster, no way around it
>>
Government caused disaster? What are you referring to Bush Bank Bail out or his Detroit Bailout? Or his 500 B in unfunded Medicare prescriptions (if that don't get old people to vote for you, I don't know what will) or his 2 Trillion in wars? Too bad we never found those WMDs we paid 30 M for the heads of each of Saddam's sons, couldn't we just do that with the WMDs
.... I guess I'd call those government dug holes, so I can't disagree with you. Too bad it cost the lives of 4736 nato forces in Iraq and 2071 in Afganistan.
<< <i>
We spent 2 Trillion and don't have the courtesy to get our money back through the Oil in the ground and the minerals in the mountains. At least Britian knew how to colonize back in the day..
but I sure as heck don't need a government chart to tell me whose digging us into the biggest hole we've ever been in because I've been paying for it, and it sure looks like that's not going to change. . >>
right on brother....
So what do we cut in the budget that has an actual impact? Don't say foreign aid, b/c that aint helping the debt. Rememer the old people have to vote you in, b/c kids under 40 don't vote in numbers to make a difference in elections..
Edit: Too bad we never found those WMDs we paid 30 M for the heads of each of Saddam's sons, couldn't we just do that with the WMDs
<< <i><<Our abundant resources and economy has cushioned us from the harsher aspects of a currency collapse, but we now have a system that is rife with vulnerabilities in the supply chain, the public health system, home security, national security, the means of production, and the social fabric.
>>
You sound much like the politicians you criticize.
Lots of scary words, no data or facts to back them up. Everyone's entitled to opinions, not facts
Yup, I just go along and make this stuff up.
I'm not trying to troll you, but I'd like to know how you conclude: "we now have a system that is rife with vulnerabilities in the supply chain, the public health system, home security, national security, the means of production, and the social fabric"
I may agree with you, but I want to hear you out...
my three favorite classes in college were logic, debate and a writing class. (history major, like most around here)
One note, do your children a favor, when a writing class is disguised as "victorian literature" class and the prof has written 4 books on it... it's not a normal writing class...tell them not to take it...
keyboarding was my favorite in high school.....
Edit: I googled "victorian literature" and my college name and she was the first hit. Its been 18 years since I took that class. Scary.
You give the impression that you don't think $787 billion "stimulus" (actually it was over $800 billion) is a big deal. I say it is. If the total deficit is $13 trillion or so, then $800 billion accounts for over 6% of it - in just a single program in a single year. This is just Item #1 on the list - others will follow...
Let's remember what the debt is - it's the total obligation that the government must pay out regularly in the form of interest payments to bondholders, including China and another new category that was never significant before in any reporting - "households". Out of nowhere, "households" began buying huge gobs of new Treasuries, and this only happened as China has begun cutting back on purchases.
Hence my reference to "phantom buyers". Everybody knows that the "phantom buyers" are the Fed, who is now known to be buying Treasuries en masse. So, let's examine the logic that you desire to be a part of this discussion, shall we? We have a huge expense which you say isn't large, but I say it is - being financed with the issuance of government debt, and that debt is being bought by the private banking cartel (headed by the Fed) with tax dollars that were given to it (in the $800 billion Bank Bailout - Item #2) after it gambled and lost it's own assets. The net result is that tax dollars are being spent to pay off debt that was incurred by bank gambling losses in order to blow it on public works projects that really aren't creating many permanent jobs.
So, the banking cartel is gaining an interest-bearing asset by spending free money (from the Bank Bailout) which was taken from the taxpayers in order to buy those interest-bearing assets which were also created at the taxpayers' expense (in the Stimulus Bill). These two expenses amount to a 12% increase in the debt, in one fell swoop - and the only real beneficiaries were the private banking cartel, aka the large investment banks, headed by the Fed.
For the record - the bank bailout was done under Bush with a Democratic Congress; the stimulus was done under Obama with a Democratic Congress. Paulson was a Goldman Sachs alumnus and a Bush appointee; Geithner is a Goldman Sachs alumnus, a Goldman prodigy under Paulson, former NY Federal Reserve Bank Chairman prior to becoming Treasury Secretary, a tax cheat, and an Obama appointee.
How does any of this impact the potential for hyperinflation? Simply put, it adds to the total of the debt, and the debt has to be serviced. As I pointed out earlier, when interest rates rise (and they will as the market demands higher rates for higher risk), then the interest becomes much harder to keep paying. ON TOP OF THAT, the Medicare and Social Security liabilities I mentioned previously are UNFUNDED, which means that they don't appear in the $13 Trillion total debt. During WWII and after, there was no huge UNFUNDED LIABILITY to be paid. Now, there is. That's the difference between then and now, so the chart you produced is not the total picture by any means. You can bet that the debt will be paid, but it will be paid with INFLATED dollars.
If you think that increasing tax rates can account for paying both interest on the debt AND the HUGE unfunded liabilities coming due, I guess maybe there won't be a big inflationary spiral. Unfortunately, higher taxes tend to completely change a business model in terms of capital requirements and profitability, so good luck with private industry job creation without a reasonable tax structure and don't forget the increased drag on profitability of more bogus regulations and reporting requirements of all sorts. That's a taste of the type of slow growth Japan has been seeing for the last 20 years, after Japan was once heralded as the Asian Economic Miracle.
And THAT is why I don't think that the government will go the high tax/low growth route. I think that the politicians will take the bait of easy money, pump-up consumption via idiotic spending programs and more irresponsible government giveaways - ending finally in a default via high inflation. At that point, anyone whose wages can't keep up, anyone whose fixed incomes can't keep up, anyone whose savings are being eroded - will all spend dollars and exit dollar accounts in rapid fashon. THAT's hyperinflation - a rapid loss of confidence in the currency, and a rational act in response to an irrational economic policy.
We can discuss your other points too, but they all fold into this same situation regardless of who did what to whom and whose fault it was or is.
I knew it would happen.
<< <i>we won't have hyperinflation, just a fast shrinking dollar value >>
Any real difference?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>we won't have hyperinflation, just a fast shrinking dollar value >>
Any real difference? >>
No. Same thing.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
There is one thing that the leaders of both political parties in this country share - and that is wealth. One of the reasons the Democrats struggle is that the elected Dems tend to be super-wealthy (Corzine, Kennedy, Rockefeller - even Obama is worth millions due to book sales). So for policies that benefit the wealthy at the expense of the working class, one party supports those policies because they represent that constituency, and the other party may oppose those policies on principle, but if the policies fail then they are personally ok. If the Bush tax cuts on the wealthy are extended, then all our elected leaders personally benefit.
Why that has anything to do with hyperinflation - hyperinflation is the one thing that could undercut the wealth of those leaders, plus the wealth of every CEO of every major US corporation. That's a ton of real power that would be destroyed. Won't happen, because those folks won't let it happen. It is perfectly possible for something to happen that eliminates the middle class and keeps the median real wage trending flat to downward - so it's perfectly possible that some more bad things happen to the economy. It's just that hyperinflation isn't one of them.
I would expect it much more likely that the US adopts a regressive VAT type European system or a regressive Flat Tax, or cuts government spending sending unemployment to 15-20% well before anything hyperinflationary occurs.
Let's say that the Chinese decided to try to sink us and dumped our debt on the market to try to drive up our interest rates and drive up inflation. I would expect three things to happen:
#1 - a buyback of US debt by the aforementioned billionaires and multi-millionaires to partially cushion the blow - the companies can afford it even if the individuals cannot
#2 - a massive "buy American" ad campaign which would lead to our industry spinning back up (could happen quickly), an end to our trade deficit
#3 - a mobilization for a hot war against China if #1 and #2 weren't enough. They may have some tech that could be used against Aircraft carriers but more bombs would drop in Beijing than in LA, and that would not be something that China would want. But if they did, then the boost to the paper economy from the war would solve many economic problems temporarily.
With the European economic meltdowns in Portugal, Greece, etc., there is no chance any more of the Euro displacing the dollar as the world's reserve currency.
Again - many many bad things can certainly happen in our economy. Realistically, hyperinflation isn't one of them.
-Fred
Successful BST (me as buyer) with: Collectorcoins, PipestonePete, JasonRiffeRareCoins
Knowledge is the enemy of fear
Hyperinflation will not be caused by a political or social-economic event. It will be a result of a currency collapse. A lack of confidence would be the spark.
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
We backed our debt with gold from 1944 - 1971. Hence the debt incurred back during WW2 could have been settled with gold, a monetary unit that could not be debased or created out of thin air. That's far different than today where our debts can only be transferred to someone else by employing FRN's or TBonds (ie IOU's). In today's world debt only grows since it is never retired because every new piece of fiat is just another liability. Debts are therefore never officially settled, only transferred.
roadrunner
I think the definitions and discussion in that article are great, and I will excerpt them here:
But hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same—because in both cases, the currency loses its purchasing power—but they are not the same. Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena. Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money—they want less of the currency: So they will pay anything for a good which is not the currency.
Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.
Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money—they want less of the currency: So they will pay anything for a good which is not the currency.
Box of 20
Liberty: Parent of Science & Industry
<< <i>Please share with everyone your best reasoning for why Hyperinflation won't happen in the U.S.
Mine is: The financial services & investment industry is HUGE. There are TONS of people reliant on the whole system "the way it is". Not to mention those in power politically. Tons of 401K money being constantly (mindlessly) pumped into the system buying stocks, etc. Most of the public (95% ?) is totally ignorant as to what may or may not be going on financially with Wall Street, currencies, or commodities, the rest of the world, ect. Busy watching TV. So the public is unlikely to cause a "run" on the dollar/banks. Yes, the US has huge debt. So does everyone else. The way I see it, we are in a global "the emperor has no clothes" situation - but no one - ever - is going to call the emperor on it. >>
Reasons #1 - #100:
Inflation also steals money from the rich and elite.
Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money—they want less of the currency: So they will pay anything for a good which is not the currency.
These are good definitions to keep in mind. A high rate of inflation can lead to hyperinflation.
However, a rise in prices is not inflation. Inflation is an increase in the money supply, and prices may or may not be affected - depending on the demand.
Here's the kicker - when the Treasury sells bonds to finance ongoing government operations, that debt is monetized by the Fed when the Fed creates dollars in order to buy the debt. At the same time, that new debt adds to the cost of financing the total debt. The growth in the cost of financing the total debt has been increasing exponentially. The problem is that the economy and the tax base have not been increasing exponentially and tax revenues cannot keep up with the spending + the cost of financing the debt.
The math doesn't add up. Eventually, it will. That's when hyperinflation may become reality. It's either that, or a default on government debt. We might live to see it.
I knew it would happen.
<< <i>Reasons #1 - #100:
Inflation also steals money from the rich and elite. >>
The elite and wealthy are prepared and will take advantage of the situation. Situations like this are great opportunities to make loads of money.
Liberty: Parent of Science & Industry
Knowledge is the enemy of fear
If hyperinflation were inevitable, you would want to borrow heavily and to buy real assets. Some businesses might be good, some not. It depends on whether or not they stay in business while their customer base is decimated by hyperinflation.
Then again, nobody knows what our congress and administration are capable of if such an event were to occur. They seem fine with bailing out some entities, but not others. It depends largely on your political connections. Not good for most people.
I knew it would happen.
<< <i>#2 - a massive "buy American" ad campaign which would lead to our industry spinning back up (could happen quickly), an end to our trade deficit >>
I believe this happens in a Tom Clancy novel for whatever that's worth
Geez, this is a debt based "economy", didn't you guys know you can SPEND your way out of debt, and all is well?
What is so difficult about that?
More spenders (mostly of money they never earned) pop up every day as the real savers watch the 0.01% interest paid on checking accounts up to $500,0000 to see there savings stagnate.
If you can't beat them join them, so spend away and we will fix this minor inconvenience right away, together, because that is how we roll!!
America is different in that as a whole it practictes blind faith in aworld they have no concept of and will be triumphant.
NOT.
I see interest rates increasing, government going after more tax money, and more dollar devaluation. Gold/silver is a hedge against confidence. Be diversified, save currency for that cash purchase asset.
I see interest rates increasing, government going after more tax money, and more dollar devaluation. Gold/silver is a hedge against confidence. Be diversified, save currency for that cash purchase asset.
For the sake of the debate, let's explore this a bit. Let's say you buy a rental property with cash for a good price. If a massive deflation did occur, many more people will lack cash which means that some tenants might not have the rent in about 8 months or so. All of a sudden, your great rental property is losing cash every month, in an environment where cash is king.
So you've spent a chunk of your cash reserve, and now taxes are increasing to boot. And if the massive deflation then turns into high or hyperinflation, the dollar is then losing purchasing power rapidly, you are now being taxed more on fewer (and cheaper) dollars, the value of the property is crashing and your tenants aren't paying. But you are still paying your new mortgage note (albeit with cheaper dollars). So, you are throwing bad money after bad at that point.
I'd make sure that you really wanted the property before buying anything. Cash flow is always very important.
I knew it would happen.
to watch other people. I like to see what the Big Boys are doing in this market. This gives me a clue to
future results and such.
Hmmmmmm.
Soros has has recently sold off over 1 million shares of JP Morgan/Chase, Citi and Goldman (banks).
Paulson (Hedge fund: Paulson and Co) has also dumped 14 million shares of JP Morgan/Chase. He also dumped all of
his position in Family Dollar and Sara Lee. Those two are certainly consumer oriented.
Buffet (Berkshire Hathaway) has pulled back their position in consumer stocks by over 20% (Johnson and Johnson, Kraft, Proctor
and Gamble). They also dumped their position in Intel.
So, looks like the big 3, as I call them, do not have the confidence in the consumer or banking sectors. This tells me that they
want cash. Preparing to buy when prices drop like a rock some day off in the future. Now this has happened since the first of
the year (2013). What do they see that we don't? Or do we see it, too?
Looks like the above would indicate heavy inflation and another round of banking and mortgage fiascos.
bob
While he keeps printing US dollars, he says the US dollar is strong.
Why wouldn't you believe him?
He's definitely one of the most honest, ethical and intelligent human beings I have ever known.
Pardon me while I barf myself silly.........
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
<< <i>Inflation yes, hyperinflation no. The US has never experienced hyperinflation, the Great Depression saw massive deflation. If you have cash to purchase income assets such as rental properties, businesses I would do it.
I see interest rates increasing, government going after more tax money, and more dollar devaluation. Gold/silver is a hedge against confidence. Be diversified, save currency for that cash purchase asset.
For the sake of the debate, let's explore this a bit. Let's say you buy a rental property with cash for a good price. If a massive deflation did occur, many more people will lack cash which means that some tenants might not have the rent in about 8 months or so. All of a sudden, your great rental property is losing cash every month, in an environment where cash is king.
So you've spent a chunk of your cash reserve, and now taxes are increasing to boot. And if the massive deflation then turns into high or hyperinflation, the dollar is then losing purchasing power rapidly, you are now being taxed more on fewer (and cheaper) dollars, the value of the property is crashing and your tenants aren't paying. But you are still paying your new mortgage note (albeit with cheaper dollars). So, you are throwing bad money after bad at that point.
I'd make sure that you really wanted the property before buying anything. Cash flow is always very important. >>
I don't believe the FED will ever let there be a shortage of cash or credit. While there may be a reduction in jobs, wages are guaranteed a minimum payout. Fortunately wage laws prevent minimum pay from being set by market forces and only jobs are at the mercy of the market.
I personally believe stagflation is in our future.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
I think we have had hyperinflation here back in colonial days.
<< <i>I don't believe the FED will ever let there be a shortage of cash or credit. While there may be a reduction in jobs, wages are guaranteed a minimum payout. Fortunately wage laws prevent minimum pay from being set by market forces and only jobs are at the mercy of the market.
I personally believe stagflation is in our future. >>
It's not a matter of the FED "letting" something be or not be. At some point the fed will lose control, and then hyperinflation will ensue.
Knowledge is the enemy of fear
Knowledge is the enemy of fear
Again, the big four events that can cause a major currency to go to zero: revolution or civil war, loss of a major war, major famine, major plague. When talking major, figure 10% to 25% of the population as short term casualties. Sane folks will not be counting their money when people are dying left and right. Major powers and their currencies don't fall by inertia, they topple, and it tends to take a huge catalyst to make it happen. For those stockpiling ammo, water, and food, keep in mind, when it hits, the local area may become uninhabitable, and all those stockpiles will have to be left behind if a person wants a reasonable chance to survive.
1) renters will not be able to pay
2) one has spent a "chunk of cash reserves"
3) deflation turns to inflation
4) you have a mortgage to pay, and now can't pay it
If all those "assumptions" are reality or become reality, I agree with your conclusion. However,
1) securing renters that have a very high probability of being able to pay in a downturn is not that difficult. Completed
2) large "chunk of cash reserves" have not be spent. Cash on hand is good. Completed
3) I'm still in the deflation or stagflation camp. No hyperinflation. This is the cat in the birdcage, hyperinflation would eat cash reserves
4) there is no mortgage. Property was purchased with cash, currently rent money is building up cash reserves. Completed
The above facts help to assure a positive strong investment, but hey anything can happen to turn things upside down.
And yes, the "value of the dollar" has declined over the past 100 years and the "value of gold" , as well as other assets, has increased for the past 100 years. I see this continuing. However, people will still lose vast sums of money (in any form) if they are invested in blind faith in any asset.
Knowledge is the enemy of fear
What could possibly go wrong?
I knew it would happen.
<< <i>I can only see the full faith and credit essence evaporating if the USA is taken over by another country or aliens. I dont think either is likely during my lifetime. >>
You have more faith in the clowns that run Washington than I do...
<< <i>It seems I need to remind some of you that the USD is backed by none other than the "full faith and credit of the US." Does anyone see the full faith and credit of the US declining? What happens when the essence of what the dollar is backed by disappears (because it is backed by nothing than essence), that the value/buying power of the USD would drop precipitously? That would be hyperinflation. Do some of you not see the possibility of declining "faith and credit of the US" given what we are seeing from our government and around the world right now? Does anyone here think things are getting better in this regard? >>
The USD is NOT backed by faith and credit of the US government. They are not US Notes, they are Federal Reserve Notes. Its only backing is another party's willingness to accept it as payment.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>I can only see the full faith and credit essence evaporating if the USA is taken over by another country or aliens. I dont think either is likely during my lifetime. >>
You have more faith in the clowns that run Washington than I do... >>
You and Jmski are obviously placing your faith with the wrong people. My faith is with the American People, as an entity. The USA populace, sans about 1000 elected officials, are a force to reckon with.
Knowledge is the enemy of fear
I knew it would happen.
Liberty: Parent of Science & Industry
<< <i>Hyperinflation won't happen in the U.S because there's always someone willing to sell it for less >>
That "lower" price will rise just as fast as the higher prices.
Hyperinflation won't happen as long as slow inflation remains controllable. No different than PM prices.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>Hyperinflation won't happen in the U.S because there's always someone willing to sell it for less >>
That "lower" price will rise just as fast as the higher prices.
Hyperinflation won't happen as long as slow inflation remains controllable. No different than PM prices.
Anyone every think that maybe the last 80 years have been hyperinflation, just spread out over several generations to lessen the effect?
Knowledge is the enemy of fear
<< <i>Anyone every think that maybe the last 80 years have been hyperinflation, just spread out over several generations to lessen the effect? >>
Appears this idiot did in this thread on 10/9/13 at 10:01 AM
"Slow, "regular" inflation is not healthy economic evolution. It is a stealth method of devaluation. In a healthy economy, consumers should not have to change budgets and adapt to slow changes in price. It is this "slow" inflation that required mothers and wives to enter the workforce out of necessity and required further indebtedness. When that no longer satisfied the need for more income, borrowing and second mortgages became the norm to maintain an accustomed lifestyle. The fact that it has slowly taken place is no more acceptable than if it were sudden. Those that accept "slow" inflation have been conditioned to do so. It doesn't have to be sudden to be classified as hyperinflation. If one were to look at the cumulative "slow" inflation, one would be justified to label the sum as hyperinflation. A "slow" death still results in being dead."
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
So far, it's not been an issue in spite of QE. Or should I say, it's not been an issue for most of the people in this forum. What about the record high numbers of - what do they call it now? It's not "unemployed". It's "people out of the workforce who are not seeking work". I forget the official newspeak term. U6? Some are retired. Some are actually disabled. Some are lazy. Some are uneducated. Some are criminals. Some are just down on their luck. The main problem is that gov.com only makes the overall situation worse by killing jobs and making it easy to get handouts and creating all sorts of "special classes". My opinion.
Maybe the fiscal numbers don't really mean anything as long as production output exceeds people's "needs". Maybe "money" can be distributed to government dependents, including corporate welfare recipients for a very long time without consequences. I don't think so, but I could be wrong.
I'm pretty sure that the Keynesian socialists and the Rinos have screwed things up pretty good. We shall see.
I knew it would happen.