tag:blogger.com,1999:blog-27697009.post3102249272048638393..comments2024-02-29T03:21:35.007-08:00Comments on The Great Depression of 2006 : Inflation, It's There SomewhereJim in San Marcoshttp://www.blogger.com/profile/09435296419912935381noreply@blogger.comBlogger45125tag:blogger.com,1999:blog-27697009.post-57234314308072263742010-08-08T11:29:11.974-07:002010-08-08T11:29:11.974-07:00When the bottom falls out (high inflation) there i...When the bottom falls out (high inflation) there is no currency to go into to protect your wealth (every country is fiat based... I think Switzerland is the only one not 100% paper... it backs its currency with 30% gold.).<br /><br />Gold could be confiscated or highly regulated as Jim pointed out. They did it back in the '30s here in the USA. We're more socialistic or fascistic now then before so you can guarantee stringent government interventions when the bottom falls out.<br /><br />The only thing to do to avoid losing your wealth is to invest your capital and reserves into hard assets at the appropriate time. <br /><br />To me that would be shelter, food, water and energy. In other words apartments, farms, wells, oil/elec/solar companies or the like.AIMnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-33232941946012191802010-08-08T08:38:53.126-07:002010-08-08T08:38:53.126-07:00Frakak
Your last statement made me made me laugh....Frakak<br /><br />Your last statement made me made me laugh. There is an old saying "misery loves company". When the dust settles and we are all a little poorer at least everyone will be able to say "I told you so". That might make the promise sandwiches the politician are making right now taste a little better.<br /><br />RobRob in NSnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-1610064789537086742010-08-07T03:43:31.991-07:002010-08-07T03:43:31.991-07:00Jim, my mum was making the point about Australia d...Jim, my mum was making the point about Australia doing worse than the U.S. only in the unemployment area, our society back then did not have the industrial base the U.S. did. Obviously when you are starving it goes beyond making comparisons!!<br /><br />Rob I liked your point about derivatives, that has also crossed my mind, I wonder if Obama passed legislation that outlawed the nearly "unexplainable" derivative if it would call the bankers bluff??<br /><br />Jim shadow stats has articles on the potential of a "hyperinflationary depression," hey, if it keeps everyone happy at different ends of the debate, then we can all have solidarity as we adjust to our new found poverty:-)<br />cheersfrakrakhttps://www.blogger.com/profile/10110027067402980842noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-42084126181740711772010-08-06T21:08:06.575-07:002010-08-06T21:08:06.575-07:00Hi Anon 11:27
I have no disagreement with your st...Hi Anon 11:27<br /><br />I have no disagreement with your statement "I believe it is very wrong to say there hasn't been debt destruction and loss of wealth"<br /><br />I would argue that we have had no massive debt destruction as occurred in the Great Depression. Losing 90 percent is a very vast amount of savings and that has not happened--yet.<br /><br />The argument now revolves around how this debt destruction will occur. The government can print itself out of existence or promise fabulous benefits to all of the retirees and go bankrupt.<br /><br />The Kondratieff wave theory suggests that there will be a great redistribution of wealth. Once you lose your cash reserves, the formerly rich then have trouble supporting their asset base with taxes and the like.<br /><br />The only reason gold and silver were a lousy bet in the past was because they paid no interest. Well getting 2% interest in the bank and having 6% inflation, the precious metals look pretty good. Once people figure this out, look for government to ban gold ownership. That's already happened in Thailand.Jim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-78294004118368556062010-08-06T20:30:09.050-07:002010-08-06T20:30:09.050-07:00Hi Spectre
I have no disagreement about the natio...Hi Spectre<br /><br />I have no disagreement about the national debt, its a bubble. It's kind of like a close relative borrowing your life savings and squandering it on vacations, cars and women. Once you realize that they are not going to pay it back, your retirement future would look rather grim. That relative is our government. <br /><br />Some people suggest that we are passing these debts onto our children, I suggest that is what is called a "car salesman close" just as is the statement that the government is doing this to ward off deflation. If you accept either one, you're denying the existence of a ponzi scheme run by Uncle Sam.<br /><br />Our government has borrowed all of our savings (17 trillion) and spent it and is paying us 2% interest, what a deal!<br /><br />Bear in mind, these are just my thoughts, there is no right and wrong here. If we all thought the same, we'd all be driving the same model cars.Jim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-23152986885423236192010-08-06T19:57:11.485-07:002010-08-06T19:57:11.485-07:00Hi Rob
Your first comment gave me a chuckle '...Hi Rob<br /><br />Your first comment gave me a chuckle 'The argument over whether we have inflation or deflation is really a moot point if you have no money.' It reminds me of the real estate salesman saying you can deduct your interest on your home from you income taxes. If you don't have a job, deduct it from what?<br /><br />Your last comment sums it up, the government is not going to stop printing money any time soon.Jim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-91378657519606893582010-08-06T15:38:50.875-07:002010-08-06T15:38:50.875-07:00Unless these houses are burning to the ground upon...Unless these houses are burning to the ground upon foreclosure there has been no loss one way or the other. As for all the derivatives it is an end sum game. Nothing is produced by them and consequently nothing is lost. I suppose if you are on wrong end of the deal you would disagree. Those derivatives are, when it's boiled down, just bets between Hedge funds Big banks and other corporations. Someone wins but someone also loses. I'm just an average joe, the people with all the toys can play Russian Roulette as long as they want.<br /><br />The deflationists seem to think the government at some point will have to stop printing money. I have to ask why would a politician do something like that? What is to stop the government from sending everyone a cheque for a couple of hundred grand? We have been running deficits in Western Europe and North America for last thirty years. Why stop now?<br /><br />robRobnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-72835096972303329452010-08-06T11:27:05.386-07:002010-08-06T11:27:05.386-07:00Jim,
I believe it is very wrong to say there hasn&...Jim,<br />I believe it is very wrong to say there hasn't been debt destruction and loss of wealth. It doesn't matter if the money is just digital numbers because it is still money in our fiat system. People lost their down payments and the money they put into their houses that were foreclosed on; banks lost money on those loans; people lost money in their stocks and bonds; banks and investors have lost a lot on all of the derivative and toxic assets that Wall St. created. It may all be numbers but those numbers are on their balance sheets and their balance sheets show what their net worth is. If someone has 1.5M in assets on their balance sheet they can sell those and use the 1.5 to buy something else, doesn't matter if it is digital money or dollar bills. It is whatever is accepted as currency in our country. People have lost money and wealth. Asset deflation does mean something. It is wealth deflation. If your apartment bldg is currently worth 30% less than it was worth in 2006 and your rental income is only 20k instead of the 37k it was in 2006 you have lost money and wealth. Deflating assets and debt destruction is what is keeping inflation from running rampant (the banks aren't lending or putting money out because they know they need all that money to deal with the aftermath of all of their asset deflation (their loans).<br />The agreed upon point of wealth are those digital dollars, numbers on the computer screen and figures on your balance sheet.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-13972337694815628152010-08-06T07:54:35.495-07:002010-08-06T07:54:35.495-07:00Jim, that million dollar home you mention was leve...Jim, that million dollar home you mention was levered up 40 to 1 by the banks. How exactly do we squeeze 30 to 40 million out of a house that has a present worth of 1/2 million dollars? You forget about all those diveratives that must be marked to reality at some point. The national debt just went north of 13 Trillion Dollars, and if you don't see a loser in all this, I'm not sure I can help with the big picture. The losers are us my friend. That would also include our children and grandchildren who have no way to pay for our follies.SPECTRE of Deflationnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-27182891741942673522010-08-05T20:55:31.774-07:002010-08-05T20:55:31.774-07:00Hi Frakrak
I guess I'll get around to posting...Hi Frakrak<br /><br />I guess I'll get around to posting again on Saturday. Still chasing loose ends and catching up on what has happened.<br /><br />Your discussion with your mother strikes a harmonic cord. I talked to several people of that era and everyone saw it a little bit different. The only thing everyone agreed on was that they lost a lot of money and jobs were hard to find. People found a way to make do.<br /><br />I think that the real big difference between the last catastrophe and the present one, is that in the first one, a run on the banks "destroyed" the savings of the country. It was not like the money was there, it was gone and the run on the bank proved it.<br /><br />This time, the money is gone and the Fed will print cash to keep each bank account at full value. There is no reason to have a run on the bank, "your money is still there!" You can't get to it because your not at retirement age yet and of course, penalties if you do. The question arises, is it really your money or the governments? They are going to tell you when you can spend it.<br /><br />The thing that confuses me,is the money printed to ameliorate the present situation. 99.99 percent of the time, you receive wages for producing product. Once you short circuit that assumption, the laws of economics dictate that something has to give.<br /><br />What happens from here, will make this depression different in some respects from the last. Notice though, the government is still addressing this as a recession and they are not wrong technically, but it seems a tad bit more to me, maybe it's just my imagination running amok again.<br /><br />Take careJim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-55210978939883514052010-08-05T07:28:20.986-07:002010-08-05T07:28:20.986-07:00Hi Spectre
What I am referring to is the 90 perce...Hi Spectre<br /><br />What I am referring to is the 90 percent hair cut of the 1930's. There has been no massive loss of wealth this time around. These people that went out and bought million dollar homes with no money down didn't lose a dime, they gave them back to the banks. The banks didn't lose any depositors money, the government printed more of it.<br /><br />Lose your job and get a government paycheck for two years.<br /><br />Our money is still intact. The question is; is there enough product to buy with the savings that is in the bank? I tend to believe that there is a ton of money chasing very few goods. With everyone saving dollars, it just isn't obvious yet.Jim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-37509892691903649952010-08-05T06:33:20.727-07:002010-08-05T06:33:20.727-07:00A few days ago I spoke to my elderly mother about ...A few days ago I spoke to my elderly mother about her recollection of living thru the Great Depression, and she made the point that it hit Australia later and deeper than it did in the U.S. <br /><br />Australia at that time was a primary producing economy (sheep, wheat and coal mines), although at the turn of last century we had the highest standard of living in the developed world (before the depression). Australia didn’t have any or much of an industrial base at that time.<br /><br />It does parallel presently certain aspects of developed economies, where the industrial base has been uprooted to countries like China and India; The deflationary scenario could make the 1930’s episode look like an entrée to the deprivation the West could face on the extreme downside.<br /><br />And if we reflect on further differences with the then and now, we have figures that conservatively estimate the global derivative market at 250T, ticking away just waiting to be pricked, I don’t think Hoover faced that challenge? I read recently when Lehman went T#Ts up it took 13T to fill that particular hole in the derivatives market. No wonder President Obama can’t quit smoking :-)<br /><br />Financial Services in developed economies have grown exponentially in twenty years, in the U.K. it accounts for over 40 percent of their GDP, and yet this country exports very little else, but a financial casino.<br /><br />A report on Australia’s 1 T superannuation industry (released yesterday), showed that it actually has cost the government more in superannuation incentives than it would have to provide the retirement pension estimated to cost 26 B. Fund managers have gouged nearly 30 B from these funds over the past twenty years, a lot of funds have actually gone backwards. Over twenty years they have averaged about 1.5 percent return per anum. <br />I love the concept of free markets, conservative governments, but I would like even more to be able to live when I retire, capitalism seems to be getting too expensive for the average tax payer :-)<br />Hoping for inflation, you have a near perfect score so far :-) Aloha to you and your wife ….frakrakhttps://www.blogger.com/profile/10110027067402980842noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-5101365321697704472010-08-05T04:57:33.740-07:002010-08-05T04:57:33.740-07:00The savings rate is pushing 6% if memory serves me...The savings rate is pushing 6% if memory serves me right. Consumption with no production is what we have already been living for quite a while. No money lost by anyone is not correct unless the American Citizenry counts as nothing.SPECTRE of Deflationnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-45605675138016913122010-08-04T21:01:18.522-07:002010-08-04T21:01:18.522-07:00Hi Frakrak
Sorry for the lag time to respond. My...Hi Frakrak<br /><br />Sorry for the lag time to respond. My wife won a trip to Hawaii and we have been gone a week.<br /><br />Everyone has the fear that the deflation of the 1930's is about to overtake us. I tend to differ in that no real money has been lost like back then. The money that could have been lost has been printed by the government and used to guarantee and replenish your bank deposits.<br /><br />Your dollar in the bank is as good as mine. Since we have had no massive loss of wealth, there is so much cash awash in the system that the interest rate is zero. Nobody want to borrow money and if they do, they can't qualify for the loan.<br /><br />Right now we are seeing consumption, but bear in mind if you're not getting any interest on your savings, why not spend it? The inflation is real, but the incentive to save is gone.<br /><br />With 20% unemployment, you are about to see savings accounts and IRA's drained. Add in unemployment insurance, and ask yourself where is the deflation? We now have tremendous consumption with no new production to speak of.<br /><br />If you take the year 2002 and compare prices to then, I would be willing to bet that prices are still 20% higher today. Real estate is a good example even though it has dropped dramatically, it is no where near being real (price-wise).<br /><br />So from here, I see massive consumption with little production. At some point, you will have to pay more to consume product if the supply drops. We are not going to run out of money, we are going to run out of things to buy.<br /><br />I'm not sure that answers your question, but this is just the way I am reading the tea leaves.<br /><br />Take careJim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-1962812259665394042010-08-04T17:35:43.692-07:002010-08-04T17:35:43.692-07:00The money you talk about in the banks exists only ...The money you talk about in the banks exists only in the digital world. The currency does not exist, and it never will. That's why pork chops were a nickel a lb. and nobody could afford them during the first Depression.. We have an overwhelming amount of defaults yet to come which will crush your digital dollars in said banks to something resembling dust. <br /><br />Just as the private sector companies are said to be flush with cash, yet it's never mentioned that they have been raising debt to a new record to do so. The liability side of the balance sheet looks like crap just like J6P.<br /><br />Your child's tuition is proof enough that we have had our inflation over the last 35 to 40 years and have reached as a society a point of debt saturation. You cannot have an exponential growth to infinity. Every organism be it a person or a company has a maximum potential which once reached must decline.SPECTRE of Deflationnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-80584671052718467292010-08-04T07:55:03.484-07:002010-08-04T07:55:03.484-07:00Jim think I got the devaluation thing, quite a bit...Jim think I got the devaluation thing, quite a bit backward :-)frakrakhttps://www.blogger.com/profile/10110027067402980842noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-33551956128093033992010-08-03T20:57:41.747-07:002010-08-03T20:57:41.747-07:00Hi Sauciere Folle
Thank you, I'm glad you enj...Hi Sauciere Folle<br /><br />Thank you, I'm glad you enjoy the blog<br /><br />take careJim in San Marcoshttps://www.blogger.com/profile/09435296419912935381noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-16651593910081230992010-08-02T10:03:10.582-07:002010-08-02T10:03:10.582-07:00Anon Aug.1- You are correct not to start a busines...Anon Aug.1- You are correct not to start a business. We ran a business for 10 years in CA.<br />Taxes and Fees included-<br />State Income Tax<br />State Corp. tax on gross sales<br />City tax on gross sales<br />State Corp. license<br />State Business license<br />City Business license<br />County annual tax on possessions in office- desk, computers, etc.<br />State tax on purchases made out of state.<br />Parcel tax to fund local schools.<br />There are probably a few more, but you get the idea.<br />You would have to be INSANE to start a business in CA.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-4702498410239226892010-08-01T20:54:41.578-07:002010-08-01T20:54:41.578-07:00I can relate to Aim's point:
"And we need...I can relate to Aim's point:<br />"And we need small businesses and the rich to not be taxed so they can be free to expand and create jobs.<br />"<br /><br />I was going to start a small hand-craft business, but since I already have a job, the tax rate on the income would be 60%+. I concluded that I am better to just work for myself and my family, since they can't tax me for reconditioning my own furniture, or painting the house walls, etc.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-6085120207796247832010-08-01T09:40:01.549-07:002010-08-01T09:40:01.549-07:00The argument over whether we have inflation or def...The argument over whether we have inflation or deflation is really a moot point if you have no money. I speak from experience because 10 years ago I was out of work and last thing on my mind was the announced CPI on the news. <br /><br />RobAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-22735000660516840702010-08-01T01:29:41.747-07:002010-08-01T01:29:41.747-07:00Jim what say the U.S. goes thru hyperinflation, wo...Jim what say the U.S. goes thru hyperinflation, wouldn't one then reasonably expect the "green back" to be absolutely worthless as an international currency of exchange? If this is the case then we are back to a deflationary scenario because, the U.S. would be defaulting on loan obligations long before a wheelbarrow would be used for a wallet, even a miserly devaluation in your currency right now would bring on deflationary apocolypse??frakrakhttps://www.blogger.com/profile/10110027067402980842noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-70502492822827654352010-07-31T22:48:20.975-07:002010-07-31T22:48:20.975-07:00This is a cool blog and I salute your generosity o...This is a cool blog and I salute your generosity of spirit when it comes to sharing your view point so vehemently. I am not so courageous and choose only to speak on inconsequential subjects. keep up the good work. Sincerely La Sauciere FolleLa Sauciere Folle (The Mad Sauce Chef)https://www.blogger.com/profile/05535124764476556097noreply@blogger.comtag:blogger.com,1999:blog-27697009.post-22873965281492690352010-07-31T10:02:09.267-07:002010-07-31T10:02:09.267-07:00It was actually the City manager of Bell that made...It was actually the City manager of Bell that made $747K salary. He resigned but is eligible for $600+ K retirement from the state pension. Same for the police chief.<br />The mayor and most of the remaining council will "resign" later mainly because their pensions will kick in by then. My advise for productive Californians --- get out as soon as you are able.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-84501423671904810452010-07-30T10:24:20.567-07:002010-07-30T10:24:20.567-07:00It's not deflation that you should be worried ...It's not deflation that you should be worried about. It is the Keynesian and Monetarist attempts to prevent it that is what will do you in. The housing bubble and its dire effects and Japan's two decade slump should be enough evidence for you of that. Not allowing the correction is what creates a long term depression. Which then breeds war. History repeats itself.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-27697009.post-72561581003095142362010-07-29T11:01:49.898-07:002010-07-29T11:01:49.898-07:00The Inflation/Deflation debate seems to be constan...The Inflation/Deflation debate seems to be constantly coming up — from clients, institutional accounts, and the media. Let’s look at a few points on this:<br /><br />Deflation is a fact. It is happening now, it is real, and we see it in the actual data.<br /><br />Inflation does not exist presently. It is, at best, an opinion. It might happen in the future, or it might not — but it does not exist, at least on a measurable form, presently.<br /><br />What about deficits? Debt? Overspending? QE/ZIRP/Low rates?<br /><br />Well, Japan cut rates, wildly overspent, borrowed like loons — and they had a decade plus of deflation, not inflation. We may not be Japan, but they are the 2nd largest economy in the world, and represent an actual economy that behaved, well, the way the US is.<br /><br />Until the slack in the labor market is reduced — near record low weekly hours, 16% U6 unemployment, etc. — inflation simply is not a threat.<br /><br />The 10 year Treasury Bond is at record low yields, so bond buyers are looking for more economic softness, not inflation.<br /><br />The first heads up about inflation you will see will be when the Bid to Cover ratio of the Treasury Bonds — how many buyers are there relative to bonds for sale at US auction — right now, its oversubscribed 3X. Once buyers start insisting on greater yield, the Treasury department will have to start raising the bond rates they offer — we will know that Bonds are a short, due to impending inflation.<br /><br />That will be your early inflation warning.<br /><br />But now? Its nowhere in sight . . . .B. Ritholtznoreply@blogger.com