capitalisthero.com

I Quit the iPhone

I had to give up the iPhone as well b/c of all the dropped calls. It's a cool device but unreliable. I guess it's ok if you have a job that you don't require absolute reliability. In my line of work, dropped calls are potentially devastating. I'll be back when it moves to other carriers.

Why Inflation Will Drive the Market Higher

Couldn't agree more. Although the minimum wage is going up, real wage deflation will occur as inflation eats away at the purchasing power of the dollar. As wage deflation hits the manufacturing industry, American corporations will become more competitive in the international market place and exports will increase. Likewise the debased dollar will make imports more expensive leading to trade surpluses.

Moral Hazard, Goldman Edition

Goldman Sachs achieves "blow out" profits from taxpayer subsidized risk taking. Great, I guess the recessions over.

Government Transfers as a Share of Personal Income Hits 18%

Mad Trader,

You got your history wrong. Herbert Hoover initiated many of the initiatives that his predecessor FDR followed. Hoover was responsible for make work programs, Smoot-Hawley Protectionist Act, and price and wage controls. These initiatives were than magnified by FDR. The result of this poor governance, was the Great Depression. Remember Hoover/FDR prolonged the Depression by several years.

You may be thinking of Warren Harding. He approached his recession laissez-fare. The result was a deep but short recession.

> How about this idea? I spent the evening with Dr. Robert Frank, professor
> at the Cornell University School of Management, and author of The
> Economic Naturalist’s Field Guide. US Consumption peaked at $10 trillion,
> or 73% of GDP in 2000, and in the new world of falling incomes and
> enforced savings rates, it will take many years to come back. The
> current disaster was a guaranteed outcome, because while incomes
> stagnated over the last 30 years, the median home size jumped 50%
> to 2,600 square feet. California is in a real pickle, because governor
> Arnold Schwarzenegger is forced to act as Herbert Hoover did by balancing
> a budget on the way into a Depression. Deregulation poured gasoline
> on the fire, enabling an unsustainable culture of leverage. Dr. Frank
> argues that we should use this economic crisis to fundamentally remake
> the US tax system. The current system taxes savings on multiple levels,
> but spending is tax free. We need to scrap the income tax (three
> cheers), and implement a steeply progressive consumption tax. We
> need to tax pollution the same way. Dr. Frank, who co-authored a
> previous book with Fed governor Ben Bernanke, offers radical solutions.
> It seems that desperate times require desperate measures.

Inflation: As Inevitable as Death and Taxes

I agree that inflation is inevitable but I disagree that deflation is the worse of 2 evils. Deflation is what is supposed to happen in a free market competitive economy. As economies of scale and technological innovation occur, cost of production decreases, profit margins increase, and prices decline. Deflation increases the purchasing power of my dollar and makes my real hourly wage rise. Deflation is a good thing.

In contrast, inflation erodes purchasing powers, decimates your saving and your wages.

Also, I completely disagree with your comment that gold "offers protection against deflation." Cash is the best hedge against deflation! Deflation will decimate the price of gold.

Back in the U.S.S.A.

Poor Obama. He didn't create this mess, but every step a misstep; every decision the wrong one. It's like being on the Titanic and finding out the captain is Homer Simpson. The guy just has no understanding of economics or basic mathematics.

Feds to California: Drop Dead

California is a microcosm of the United States. Just as the U.S. is the best country in the world, CA is the best state. CA has hundreds of miles of shoreline, an abundance of arable lands, plentiful natural resources, optimal human capital, and some of the world's best universities. Despite these attributes, CA is on the verge of bankruptcy. The blame for the state's failure lay squarely on the elected government and the populace that elected them. The politicians are corrupt and very poor stewards of CA resources. Mexico is similar in it's abundance of resources but remains a third world country b/c of its corrupt and incompetent government. Hopefully the U.S. will not follow CA down the path to third world status.

The Short Term Case for Long Term Deflation

I think the better play is to divest yourself of dollars and t-bills and buy commodities. Commodities are a win win. If the economy recovers then there will be a greater demand for commodities. If hyperinflation occurs, then commodities are a great hedge.

Also, realize that deflation is very bad for debtors because it increases the cost of servicing their debt. The U.S. govt. is the biggest debtor the world has ever known. The govt. cannot allow deflation because it would make its debt even more unmanageable than it is now with moderate inflation.

A Nation of Savers: What Difference Would It Make?

Nice Article. We will become a nation of savers not by choice but because 80% of us are not credit worthy. As our creditors will slowly choke off our line of credit we will be force to live with in our means.

Inflation by Shortage

I agree...inflation is coming big time!

The best way to profit from coming inflation is to get someone to lend you money at a low rate today. Use that money to buy a real asset and then repay the loan with your devalued dollars. The best way to do this is to buy a house with a 30 year fixed.

Check out my article "Hedge Inflation...Buy a House" on my website.

Krugman vs. Ferguson: Hubris of Small Differences

Both of these D-Bags are wrong. Keynesian economics will always fail. Please read my article:
capitalisthero.com/Key...

T-bill yield will continue to rise and rise as the federal government attempts to fund mal-investments disguised as stimulus. Get out of cash and bonds and into commodities.

Profiting from Inflation: 7 Investment Ideas

I maybe guilty or disregarding the lower tiers of the tax bracket but if you'll notice in my article I use the example of the highest tax bracket. If you're in that bracket you're itemizing.

You are correct when you say mortgage rates will spike up once inflation hits. That's why you strike now while mortgage rates are historically low.

Simply put, if someone wants to lend you money at an interest rate that is lower than the rate of inflation, then you should borrow as much as possible.


On Jun 02 11:58 AM hanumanhojo wrote:

> Nothing irks me more than bad math. For the example in your link,
> you neglected standard deduction which is the typical newbie mistake.
> A 5% rate on $100K comes out to $5K. That less than the standard
> deduction for a single filer thus you pay full freight on the interest.
>
>
> As for home price appreciation in face of inflation, that would be
> hard to determine. There is enormous supply fighting inflating currency.
> The high inflation will also spike up mortgage interest rates thus
> resulting in a capital loss on the home value.

Profiting from Inflation: 7 Investment Ideas

You can also hedge inflation by buying a house with a low fixed interest rate.

Read my article capitalisthero.com/Hed... where I explain in detail and crunch the numbers.

Why Is California in Economic Trouble?

Krugman's an idiot. He's a mildly interesting columnist but has little understanding of economics.

Falling or Steady Oil Prices: Either Way Is Good for Stocks

Oil prices are going up not because of demand but because of inflation or fears on inflation. All assets will increase in price. Stock will go up too but not as much as commodities.