Printing presses
If you think money is cheap now, just wait. If this keeps up, it won’t be worth a dime.
Remember, I do this to entertain me, not you.
Uncle Pays the Bills
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January 26th, 2009 at 3:04 pm
Well, if you look at the problem as fundamentally one caused by people borrowing too much to live beyond their means, which I think is the root of this, one way to get out of the problem is to inflate your way out. Not saying it’ll be pretty, but as scary as inflation is, it’s not nearly as scary as deflation, which is what we’re looking at now. Inflation is good for people who are in debt, and if deflating asset prices continue to be a problem, inflation doesn’t start looking too bad.
January 26th, 2009 at 9:28 pm
Sebastian, The problem, I think is that the banks will do damn near anything, even flirting with deflation, to avoid inflation.
Sure, inflation would be a PITA right now, but with a few years of spiraling prices and wages and my mortgage note will be spare change every month.
And a $200 BATFU stamp will be the price of a movie out with popcorn.
January 26th, 2009 at 10:25 pm
Let’s trade scary Econ PhDs!
Here’s my offering:
http://www.moneyandmarkets.com/warning-megabanks-could-fail-despite-federal-aid-2-29412
Bottom line: don’t invest, keep everything in cash, stuff the mattresses. Buy ammo and gold if you must buy something as an inflation hedge. Both can be buried. Small parcels of arable land close in to cities look good right now as well.
You already have all the battle rifles you can use, right?
January 26th, 2009 at 10:48 pm
See this:http://1.bp.blogspot.com/_nSTO-vZpSgc/SRVLM8Kif0I/AAAAAAAADs8/Ad1Iwf_fPJ0/s400/base-money-yoy-1.png
Sorry, we are NOT in hyperinflationary times, not even inflationary. We are in full blown DEFLATION. Never has there been inflation while real property values decline. Ever.
Read this for full explanation: http://globaleconomicanalysis.blogspot.com/2009/01/peter-schiff-was-wrong.html
January 27th, 2009 at 12:45 am
I’m kinda looking forward to paying off my fixed rate mortgage decades early with my wheelbarrow of cash for the week.
January 27th, 2009 at 1:53 am
So if inflation is a real possibility, then it’d be a good idea to go with fixed rates on all loans where possible? I have a pile of student loan debt, and it’s all got floating interest rates.
January 27th, 2009 at 2:14 am
Dragon – What? Who is paying off their mortgages early? Over 20% of American mortgages are upside down. Please, anyone, show me a sign of inflation anywhere. People are losing their houses left and right because their mortgages are too expensive, not because they are losing value in real terms. The money managers who predicted inflation were wrong and they bet their clients’ retirements and they went down the drain. Doesn’t it matter to anyone that their life savings has been decimated?? Is everyone here secretly hoping that Obama will save them?
Uncle – aren’t you a CPA? please kill this madness by telling everyone what you see on a day-to-day basis from your clients: falling revenues, shrinking net, and increased layoffs. That equals inflation??
Ben – “Every year, the variable rates on federal student and parent loans are adjusted based on the last Treasury bill auction in May.”
Recent T-bills have been selling for NEGATIVE interest rates. The variable rate reset in May might bring student loan rates close to 2%. The fed isn’t going to raise rates anytime soon, and Japan has had their rate near 0% for over a decade. Welcome to deflation.
Be smart people, it’s more important to defend your nest egg than ‘lose out’ on theoretical gains. The only gains in the past year have been in the shorts, cash/t-bills, and gold. I wouldn’t recommend anyone play with what they don’t know, so park your hard work in cash for the near term. If inflation comes, move into commodities.
January 27th, 2009 at 7:52 am
“Not saying it’ll be pretty, but as scary as inflation is, it’s not nearly as scary as deflation,…”
Bullshit.
You don’t know what you’re talking about, Sebastian. Relax, hold still and realize: this can happen to anyone.
Back away from the kool-aid.
January 27th, 2009 at 7:52 am
(forgot to close a tag)
January 27th, 2009 at 7:57 am
“Please, anyone, show me a sign of inflation anywhere.”
You are looking at it in that graph. What, exactly do you think “inflation” is? If you think it’s a rise in prices, you couldn’t be more dead wrong. Rising prices are only the necessary consequences of inflation.
January 27th, 2009 at 11:43 am
Sorry, that graph is inaccurate. You need to link to the % percent change per year to see how the real monetary base has grown. Here is link: http://research.stlouisfed.org/fred2/fredgraph?&chart_type=line&graph_id=0&category_id=&recession_bars=On&width=1000&height=600&bgcolor=%23B3CDE7&txtcolor=%23000000&preserve_ratio=true&&s_1=1&s%5B1%5D%5Bid%5D=SBASENS&s%5B1%5D%5Btransformation%5D=pc1&s%5B1%5D%5Bscale%5D=Left&s%5B1%5D%5Brange%5D=Custom&s%5B1%5D%5Bcosd%5D=1918-01-01&s%5B1%5D%5Bcoed%5D=2008-12-01&s%5B1%5D%5Bline_color%5D=%230000FF#
As you can see, another huge spike in the base occurred during the Great Depression – not a time a inflation btw. The reason the monetary base is rising is because everyone is selling other asset classes and buying dollars. Here’s the performance of the dollar since SHTF: http://charts3.barchart.com/chart.asp?vol=Y&jav=adv&grid=Y&divd=Y&org=stk&sym=%24DXY&data=E&code=BSTK&evnt=adv
People are buying dollars because they are INCREASING in value, not because they are losing value. Once there are good reasons to sell the dollar, inflation will be back.
January 27th, 2009 at 12:04 pm
If the choice is inflation or deflation I choose inflation.
We live in interesting times. After everything learned in the past year, why do we still flirt with socialism?
If government is the solution we passed fucked a long time ago.
January 27th, 2009 at 1:14 pm
“As you can see, another huge spike in the base occurred during the Great Depression – not a time a inflation btw.”
To begin with, I didn’t see anything at that link: it showed me a blank graph. So, although I don’t know what you were trying to show us, every economic text I own that refers to money supply in the Depression shows that it contracted dramatically. Between 1929 and 1933 alone, it fell by almost a third. That’s why there was no inflation.
“The reason the monetary base is rising is because everyone is selling other asset classes and buying dollars.”
Look, mate: that is plainly ridiculous. A demand for dollars has nothing to do with whether the government is printing dollars, which is in fact what’s happening. I don’t know what you’re calling a “money base”, but we know that the Fed stopped publishing M3 almost two years ago now (although it can be deduced) and M0 is a small fraction of it now.
Here is the fact: there will not be enough demand for dollars — in all the world — to soak it all up. Those dollars will begin chasing goods around in markets, and when they do, it’ll make the 1970’s look like The Roaring Twenties.
January 27th, 2009 at 9:31 pm
First please read this link: http://globaleconomicanalysis.blogspot.com/2009/01/peter-schiff-was-wrong.html
Here is the fixed link for your graph. Its the graph for % Chg. From Year Ago: http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s%5B1%5D%5Bid%5D=SBASENS&s%5B1%5D%5Btransformation%5D=pc1
You’re the one scared of the ‘money base’ graph – what do you think it is? Monetary Base=M0:cash and reserves of banks. Look at the base GROWTH under the Great Depression – how could there be a shortage of money? What happened was that the credit bubble burst, just like now, and they underwent deleveraging. DEFLATION occurred, just like is happening now. If we are in INFLATION why are commodities, real estate, equities, food prices, incomes, and GDP are falling? Why is the dollar RISING of there is so much of it? Check out the M1 multiplier:http://research.stlouisfed.org/fred2/series/MULT . Gee no one seems to be spending any dollars.
So now you’re changing your tune to there WILL be inflation. Well there WILL be the coming of Jesus and there WILL be the fall of our civilization. The MIGHT even be a recovery from this. If you’re now making “predictions” vs describing the current state of things then I can’t argue with you. But there is not currently inflation, we are in deflation, and I don’t see that changing for at least a year.
January 27th, 2009 at 9:33 pm
OMG linky no work – type “sbasens” into google, that is the graph everyone is worried about. Now click % Chg. From Year Ago.