johngonole

Are We More Like 1932 - or 1923?

Allan,

I'm afraid that stagflation might be the best thing we can hope for. If the Fed times everything just right we might get it. Otherwise I can completely see the Fed pressing down on the gas too long only to realize they are about to run the car off the road when its too late to stop. I see the Fed printing and printing until the velocity of money begins to normalize. The problem is with all the fear mongering the press loves to do (this bad economy story will never die.....Obama should have been careful what he wished for.....and he clearly wished it) people are going to increase their savings rate and the unemployed will greatly reduce their spending. The Fed will continue to print money far to long. When good times begin to emerge their will be far too many dollars in circulation. Foreign held dollars may also start to find their way back into this country. The Fed can try to buy back all those dollars but with what???? Will all those toxic securities be worth anything? And we know the federal government isn't going to be paying down the national debt anytime soon. So once things take off I think they will really take off. Then the medicare and social security crisis will happen and tax rates will go way up slamming the breaks on the economy. The point is that I think the Fed has lost its ability to control the money supply and the economy via money supply control because they really won't have the options. Medicare and social security will require more money be printed.

My advice is to save up about a year or two worth of money so you can survive unemployment with reasonable security. After that spend you money on assets of any kind that will hold their value. Over the next ten years buy real estate, precious metals, and anything else you think you will really need (lawn mower, new fridge, new stove....whatever) Spend it because prices must go up.

Stagflation and Peak Oil: How Related Are They? (Part II)

User 987 - All the forms of energy you mentioned above still cost more than oil as I understand it. So first oil prices will go higher then they will become viable. Still oil is used in asphalt, platics, petro-chemicals, fertilizers, etc....

Bottom line is that the entire industrial/agricultura... revolution has been built on oil. It will probably take another 100 years (short of some amazing free energy discovering of huge porportions) to simply make the transition. US Geothermal in the right areas could really be good kind of like hydroelectricity. I also like the idea of windmills as a supplement provided they can build them to last forever with very very little maintenance. Seems like a very good idea versus solar which you still have to replace every 20-25 years plus batteries. Oil shale may help with the transition. Oil/Coal/Nuclear are still the cheapest forms of energy and will likely remain so for a while. This country needs to become more energy independent. It will not only reduce the trade deficit but could actually get people back to producing real things in the country.

How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play It, Part II

I think his overall point is that we need to decouple from the dollar. Foreign investments, gold, etc will hedge us against a falling dollar. Also high monetary induce inflation can lead to stagflation or worse depression. Its like a standing wave. As time goes on the waves get larger and largers. We've been on the up wave as monetary supply increases but so have debts. As debts contract we will have deflation. His point is that the FED will try to avoid the impending massive quick deflation by inflating our currency further. This will continue to put pressure on commodity prices and will extend the amount of time it takes the country to move past this slow down. The new increase in monetary supply will most likely go into commodities or paying down debt...or banks recapitalizing. In the long run the monetary policies may work however the ups and downs are going to be more violent versus just letting the markets work because the FED can't control how the new dollars are spent or used. I'm not a pro when in comes to monetary policy but the whole thing stinks to high heaven if you ask me. We actually need a currency that super slowing gets more valuable. This will encourage good investment versus the investment environment we have today where everyone is taking on huge risky loans cause they know this is the way to play the system....bailouts, bankrupcy protection, etc...

We'd be better off without the Federal Reserve or fractional reserve banking. What good is a currency who's value fluctuates the way ours does or is doing now. Speculation is all that it left. Too many investments depend on ever diluted currency.

It seems to me that our monetary policy boils down to protecting the nation from deflation be ever increasing monetary debt. problem is interest must be paid on that debt. Most of the debt is increasing in the form of government. So we are socializing risk which results in more bad debts...and they cycle could go on till the taxpayers own nothing.

Using the Gold to Oil Ratio to Monitor Gold Equity Investments

Don't know if the ratio is correct or not. The author from his previous comments was wrong and gold went up instead of going down. Then in this article he posits that either gold goes up or oil goes down. Then he goes on to say we might have to expect hyperinflation if the FED keeps printing money. Hyperinflation should lift Oil prices so gold should follow. I fail to see how gold or oil go down if we have currency inflation. Also I'm assuming when you conclude that we will merge with a stronger dollar that you mean relative to other currencies. Prices of items and services we buy on whole have never come down in my lifetime and I don't expect them too. Silver is a good inflation hedge since supply is pretty constant. Silver should hold its real purchasing power.