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Theory of shrinking supply of consumer goods apply to coins?

orevilleoreville Posts: 12,182 ✭✭✭✭✭
Peter Schiff of Euro Pacific Capital, wrote,

"Many mistakenly believe that when the U.S. economy falls into recession, reduced domestic demand will lead to falling consumer prices. However, what is often overlooked is the fact that as the dollar loses value, the rising relative values of foreign currencies will increase consumer demand abroad. As fewer foreign-made products are imported and more domestic-made products are exported, the result will be far fewer products available for Americans to consume. So even if the domestic money supply were to contract, the supply of goods for sale would contract even faster. Shrinking supply will be a major factor in pushing consumer prices higher in America."

Interesting analysis.

Will this apply to coins or are we seeing it already?
A Collectors Universe poster since 1997!

Comments

  • Huh...??..


    << <i>So even if the domestic money supply were to contract, >>

    .....if that means I gots less money to spend on coins then ....YEP....!!!.....image
    ......Larry........image
  • rickoricko Posts: 98,724 ✭✭✭✭✭
    We do worry a lot here... Cheers, RickO
  • MarkMark Posts: 3,593 ✭✭✭✭✭
    Oreville:

    I have to tell you that as an economist that analysis is wrong in so many ways it's hardly worth thinking about. For instance, the data tend to show that the inflation rate generally falls (or rises less rapidly) during a recession. Hence the data tend to contradict his statements. And, as to the comment that "if the domestic money supply were to shrink, the supply of goods for sale would contract even faster" all I can say is "Where did that statement come from? What theory says that's right?" Once again, looking at data and not someone's opinions, the data show that in the long run, slower growth in the money supply lead to the inflation rate falling. I sure hope Mr. Schiff is a LOT better at managing money than he is at economic theory!
    Mark


  • BearBear Posts: 18,953 ✭✭✭
    If all the economists and financial gurus

    were placed end to end, you wouldn't reach

    an honest statement.
    There once was a place called
    Camelotimage
  • pharmerpharmer Posts: 8,355
    "Interesting analysis."

    No. No, it's not.
    Quis custodiet ipsos custodes?

    Apropos of the coin posse/aka caca: "The longer he spoke of his honor, the tighter I held to my purse."

    image
  • fivecentsfivecents Posts: 11,207 ✭✭✭✭✭
    I don't think you compare consumable products to collectable coins.
    Consumables get used up. Collectable coins just get passed around from owner to owner.
  • orevilleoreville Posts: 12,182 ✭✭✭✭✭
    Mark:

    You stated:



    << <i>For instance, the data tend to show that the inflation rate generally falls (or rises less rapidly) during a recession. Hence the data tend to contradict his statements. And, as to the comment that "if the domestic money supply were to shrink, the supply of goods for sale would contract even faster" all I can say is "Where did that statement come from? What theory says that's right?" Once again, looking at data and not someone's opinions, the data show that in the long run, slower growth in the money supply lead to the inflation rate falling. >>



    Didn't we have stagflation in the 1970's? Recession and inflation? Didn't Germany have a terrible recession and hyperflation in the 1920's, Argentina in the 1980's? and so forth?

    What I am seeing is that the gubermint (I like that word) is afraid of deflation and worried about the implosion of debt and is possibly pumping too much money into the economy? Tricky problem and the possible causation of inflation while the economy is still sliding into a (so-far) gentle recession?

    A Collectors Universe poster since 1997!
  • but it begs the question?? - if the euro is high against the dollar (which it is), will European coin collectors/investors start buying up US coins - it happens with British sports cars - anytime the British Pound doubles the dollar, there's usually an exodus of classic British iron that leaves this country and travels over the pond to England - I wonder if it is the same for US coins - how many Europeans collect/invest in US coins?? - would be intersting to know that number.
    currently putting together a EF/AU/BU 18th & 19th Century Type Set; and CC Morgan Set

    just completed 3d tour to Iraq and retired after 28+ years in the US Army
  • BECOKABECOKA Posts: 16,961 ✭✭✭
    With the new wealth, isn't there a boom of legitimate US coin collectors in China?

    I would imagine more buying at auction. To me this just means higher prices for us.


  • << <i>Peter Schiff of Euro Pacific Capital, wrote,

    "Many mistakenly believe that when the U.S. economy falls into recession, reduced domestic demand will lead to falling consumer prices. However, what is often overlooked is the fact that as the dollar loses value, the rising relative values of foreign currencies will increase consumer demand abroad. As fewer foreign-made products are imported and more domestic-made products are exported, the result will be far fewer products available for Americans to consume. So even if the domestic money supply were to contract, the supply of goods for sale would contract even faster. Shrinking supply will be a major factor in pushing consumer prices higher in America."

    Interesting analysis.

    Will this apply to coins or are we seeing it already? >>



    I prefer Bill Gross' explanation for why coins (or stamps) have increased in value over the past 5 years; they are correlated with GDP. Gross is also selling his stamps which tells you what his thoughts are for the future.

    I disagree with Schiff's thoughts on increased foreign demand abroad due to foreign currency appreciation. Most economies save money and much more so than the US. Perhaps this increase in wealth will lead to increases in savings instead of consumption.

    I don't believe the US faces a serious supply imbalance, in terms of consumable goods. I believe the US faces(d) a deflationary problem which is why the FED was so quick to cut post 9-11. Inflation is always easier to fight than deflation. Just take a look at Japan.
  • MarkMark Posts: 3,593 ✭✭✭✭✭
    Oreville:

    Re stagflation: Yes, in the early 1980s the inflation rate rose while the economy moved into a recession. That's why I said "the data tend to show that the inflation rate generally falls (or rises less rapidly) during a recession." I want my statements to be accurate, which is why I had to insert the ambiguity into it. Mr. Schiff, however, presents his "analysis" as definitive. What he states occurs! Unfortunately, however, what he states--that recession leads to higher prices--is generally (though not always image ) wrong.

    Re the German hyperinflation and other similar situations: Clearly hyperinflations are extreme cases. In these extreme cases, the excessively high ( image ) inflation rate is destrutive to the economy. Fortunately there is no chance of the United States entering a hyperinflation.

    And, off the subject of Mr. Schiff's comments, I must tell you that if you had asked me 5 years ago what would the effect of oil approaching $100 a barrel be, I (and I think the vast majority of other economists) would have predicted a recession. I worry with you that the Fed's current monetary policy will result in an up-tick of the inflation rate. But Mr. Schiff's assertion that if the money supply shrinks the suppl of goods shrinks even faster has no empirical validity as well as no theoretical validity (or at least none of which I can quickly think).
    Mark


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