lance sjogren

Prepare Yourself for the Inflation Invasion

The $64000 question:

When the stock market makes its coming correction, you are going to have a massive amount of cash sloshing around looking for a home.

Whoever can figure out where it is going to go will be the next George Soros.

(for conservatives who are offended, I should point out that I think George Soros' politics stink to high heaven, but the fact is he is the best example of someone who made a killing by predicting markets.)

Prepare Yourself for the Inflation Invasion

Old trader: I agree, TIPS are risky because of the way the government manipulates inflation statistics.

And it is certainly in the interest of the govt to do so. If one believes as I do that the standard of living in the US (and probably many other developed nations) got unsustainably high and will have to go down, how do we get there from here?

One way is to devalue the dollar and see that people's incomes get inflated away to lower levels that may be sustainable into the future.

If we have 10% annual inflation but the official govt statistic is 5%, then the government can lower benefits in its programs like social security in a hidden manner that won't generate public outrage.

There will not be public outrage, because those affected will be like the frog in a pot of water that is being heated up too slowly to notice)

Private companies can give their employees cost of living raises in the 5% range, and they also will thus be administering inflation-adjusted pay cuts, but again the frogs won't notice.

Prepare Yourself for the Inflation Invasion

"Those who say there's no inflation must not buy groceries, pay ever-rising property taxes, or shop for shoes, or pharmacy products."


There has been a lot of price inflation in recent years, but I don't believe there has been for the last year or so.

Unfortunately, the brief lull in inflation won't last long. And the worst of it is, the new round of inflation may be of the stagflation variety- in other words, inflation in parallel with an economy that is shrinking.

Prepare Yourself for the Inflation Invasion

Inthemoney: I agree the stock market rise the last several months is probably largely due to monetary expansion.

In my view, stocks have become severely overvalued due to too much money sloshing around looking for a home.

What I wonder is when will that stop. Stocks represent companies that operate in the REAL economy (aside from fiancials, of course). The REAL economy sucks.

Stocks are way overvalued considering the horrendous state of the real economy.

But still, the money printing goes on, and all that new money has to go somewhere.

The smart investor is one that can figure out where people are going to shift all that money once they realize that stocks are overvalued and due for a major correction.

I wish I knew.

I think at some point it will be commodities, especially precious metals, but that may still be 2-3 years down the road.

Prepare Yourself for the Inflation Invasion

Sethbru, I agree that the money supply increase the Fed has been doing up to now is largely just to fill back up the black hole of collapsed debt, and thus will not create inflation.

However, the US is running a structural deficit of at least 1 trillion per year, and I believe that is not going to be reduced in coming years, the pressures to further INCREASE the deficit are far too powerful.

And, I sincerely doubt there is going to be a market for that annual 1+ trillion in Treasury Bonds that will be issued to fund that debt. So I believe the Fed is going to print new money to buy them up.

And that will be extremely inflationary.

A Portfolio Update: Replacing Gold with Energy

perry:

why should the shine come off gold. Treasuries and USD can be created in unlimited quantities out of thin air without being backed by anything.

Those attributes render them, in my opinion, simply forms of counterfeit money, or "garbage assets".

Gold does not have the attributes that justify it's being placed in that same category.

Gold: The Next Reserve Currency Player

Eloquent portrayal of the pessimistic scenario, MexicoMike.

I am not convinced how bad a future we are headed for. But I must say that a doomsday economic future appears to be a strong likelihood.

One thing I have long believed- Americans have become complacent from having had a society of material abundance and lack of war (on our own territory) for many decades.

This has lead to a widespread view of "it can't happen here".

Another way to put it is that in the United States, the concept of "American exceptionalism" prevails. I guess the concept is based on some feeling that we have a special blessing from God, or that somehow our constitutional system of government (which has deteriorated greatly in recent years, but is still far better than that of virtually any other country) somehow makes us immune from the laws of nature to which all other human beings are subject.

Unfortunately, I see no reason why "it can't happen here".


Actually, even before the current financial crisis, you could see some of the initial signs of such a breakdown in dysfunctional places like California. The quasi-Marxist regime in Sacramento has for many years had the state's economy on the early stages of a death spiral- by jacking up taxes and spending at every opportunity, and welcoming the world's poor to flood into the state and be supported by the taxpayers. Utterly insane public policy, but bought into not only by the sheeple but by the dimwitted "journalists" who run a news media based on the grand concept of "don't worry be happy".

As the national economic downturn gets worse, one small positive side effect may be that the leftist buffoons who run places like the state of California may be thrown out of office by the populace. All that will do, however, is perhaps allow California to not deteriorate much faster than the rest of the nation.

We face a likely economic death spiral in the United States, and much of the rest of the world. Misgovernment in places like California have created parallel terminal economic illnesses. In other words, California would have destroyed itself even if the rest of the country were economically healthy. However, all evidence seems to indicate that all of us, at least in the United States, Britain, and a number of other countries, are headed for economic oblivion.