Monday, August 21, 2006

Deflation or Inflation?

Right now our government is balanced on a swords edge, fall one way and its a major depression. Fall the other way, and its hyperinflation.

The motivating force to hyper inflation, is that the Congress wants to get reelected. It has to deliver more and it is in a bind to do so, so they have to cheat. Its very easy to pay for health care costs with printed money, its very hard to tax and raise it at this time, the amount needed is more than is being taken in.

The fixed cost for social security is increasing and if you figure in medical costs, you get numbers that are out of whack. A heart bypass is $50,000. How many people have contributed over $50,000 total into social security?

Now if you figure that there is a 12 trillion dollar real estate bubble out there and it is funded by private institutions (Mutual Funds or what ever you call your retirement fund), you now begin to see the size of the problem.

The losses cannot be guaranteed to be paid by Congress, I fear they are way too large. The problem at this point in time is, that we are looking into a dilemma, which way will it go?


bubble_watcher said...

Deflation or Inflation?

Both. Deflation of assets and an inflation of goods and services in which wages fail to keep up.

Jim in San Marcos said...

Bubble Watcher

Hmmmm--Sounds like your saying that our "Creature Comforts," standard of living is going to TANK.

It sounds like the most logical of solutions. I think you are right.

I'm bothered by the fact, that if wages start to rise, they might not stop rising.

bubble_watcher said...

If one were to say that there is a deflation in asset prices relative to goods and services, then this would be technically accurate.

Right now, it's not so much that commodities are in a bull market than it is that the current global fiat currency system is in a bear market; i.e. a bubble that has already popped in which the current implosion in purchasing power is still in progress.

The gold to real estate, gold to DJIA, and gold to oil ratio charts all seem to indicate that this is the case.


Also, all the world fiat currencies are depreciating with respect to gold, as well.


This phenomenon has been in progress for over five years now and is in all likelihood going to continue for many more years to come (IMHO).