Inflation

Started by Dan, March 14, 2012, 12:22:29 PM

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Dan

At some point the economy is going to get better and when it does our excess money supply guarantees inflation. How will you guys plan for a high inflation environment?
If you believe big government is the solution then you are a liberal. If you believe big government is the problem then you are a conservative.

Solar

I've been saying this for some time now.
This is why we are stocking up on food, maybe even a two year supply in the freeze dried form.
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Dan

I don't know if you remember, but you and me talked about this scenario on the LNF board maybe 4 years ago.

Food and fuel can me managed to some point. But healthcare is gonna be a real mess.
If you believe big government is the solution then you are a liberal. If you believe big government is the problem then you are a conservative.

elmerfudd

Quote from: Dan on March 14, 2012, 05:29:07 PM
I don't know if you remember, but you and me talked about this scenario on the LNF board maybe 4 years ago.

Food and fuel can me managed to some point. But healthcare is gonna be a real mess.

Four years ago and it still ain't happened.  Could, though.

I don't know what you mean by "high inflation," but we had double digits in the 70's and I don't recall any undue suffering with respect to starvation or access to health care.  Not any more than we have right now, anyway.

Hyper inflation is another matter.  This country has never suffered from it.  Will we at some point?  I rather doubt it, but it's possible.  Plenty of countries have (Germany and Russia, for example, in and around WWI; Hungary and China in and around WWII; Brazil even later than that) but we never have.  Not even in the hundred years of the "accursed" federal reserve. 

elmerfudd

Quote from: Dan on March 14, 2012, 05:29:07 PM
I don't know if you remember, but you and me talked about this scenario on the LNF board maybe 4 years ago.

Food and fuel can me managed to some point. But healthcare is gonna be a real mess.

Your healthcare comment resonates with an item I heard today on MSNBC, the lying liberal leftist America hating network on which the Cafferty report appears.  That lying sack of excrement said that economists are predicting that in 20 years, it will take 100% of the average worker's paycheck JUST to purchase healthcare. And invited people to comment.

Which I didn't, because I was exercising at the Anytime fitness at the time.  But my comment is hogwash.  No one can spend 100% of his income on healthcare.  He's gotta eat, gotta have a place to live, gotta have a gun, gotta have bullets to put in the gun, and gotta have beer.  Those are bare necessities.  Ain't gonna happen is my comment.  Just more fear mongering. 

Cryptic Bert

Quote from: Dan on March 14, 2012, 12:22:29 PM
At some point the economy is going to get better and when it does our excess money supply guarantees inflation. How will you guys plan for a high inflation environment?

I think it would kick in when the housing market recovers...

Solar

Quote from: The Boo Man... on March 16, 2012, 07:37:07 AM
I think it would kick in when the housing market recovers...
I read it will kick in when the economy actually starts to recover and hyperinflation kicks in when the housing mkt starts to recover.
Regardless, were screwed either way...
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Cryptic Bert

Quote from: Solar on March 16, 2012, 09:20:00 AM
I read it will kick in when the economy actually starts to recover and hyperinflation kicks in when the housing mkt starts to recover.
Regardless, were screwed either way...

Then we have many many years to prepare for it..

Solar

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elmerfudd

There is a really good book on the German hyperinflation after WWI - the Great Inflation by William Guttman and Patricia Meehan.  Been a while since I read it, might reread it now.  It's out of print and for some reason used copies are kind of pricey.  It's a good book for how ordinary folks fare in times  of hyper inflation.  Your local library may have it.

Dan

Quote from: The Boo Man... on March 16, 2012, 07:37:07 AM
I think it would kick in when the housing market recovers...

I think it will kick in sooner. The housing market has the double headwinds of excess supply and much more limited access to financing than in the past and that will obviously limit demand.

The economy will do better before the housing market fully recovers. There will be certain areas that do well, but the market as a whole just has too many problems right now.
If you believe big government is the solution then you are a liberal. If you believe big government is the problem then you are a conservative.

Dan

Quote from: Solar on March 16, 2012, 09:20:00 AM
I read it will kick in when the economy actually starts to recover and hyperinflation kicks in when the housing mkt starts to recover.
Regardless, were screwed either way...

We aren't uniformly screwed. It will be a matter of knowing what are the best investment strategies in a higher inflation environment. That is really where I was hoping to have the conversation go.

Gold vs residential real estate secured by fixed rate loans. Farmland. Commercial real estate. Where do you guys see the smart money going with 10-20% inflation?
If you believe big government is the solution then you are a liberal. If you believe big government is the problem then you are a conservative.

Solar

Quote from: Dan on March 19, 2012, 08:20:54 AM
We aren't uniformly screwed. It will be a matter of knowing what are the best investment strategies in a higher inflation environment. That is really where I was hoping to have the conversation go.

Gold vs residential real estate secured by fixed rate loans. Farmland. Commercial real estate. Where do you guys see the smart money going with 10-20% inflation?
Sadly, out of the country.
At this point, any real investments would have to be long term, like land, which isn't going to appreciate anytime soon.
If I was young and rich, I'd invest in energy outside the US, in order to keep the gov hands off of it, probably move to the Caymans or something.

I think the mkt is up for grabs at this point. Most investments were done with gov handouts in mind, once Hussein and the Marxists are out of office, the smart money will be looking for the next big thing.
What that will be, is anyones guess.
I would venture to guess something along the lines of a service industry, like home remodeling, or something that will be in demand once people start working again, like servicing your car while you're at work, pick up and delivery back to your place of work.
You know, anything from an oil change and detail, to major repair, all in one day.

I think people are going to be a bit more gun shy after what has transpired, I don't see a sharp return to investing as it used to be, but rather people investing in other people to give them a return on their money in the small business sector.
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Dan

Also think about people on fixed incomes like social security and pensions.

Basically the value of a dollar follows an inverse curve to inflation. 10% inflation means a dollar is worth 90 cents next year. But you know that social security and pensions will not rise at anything close to that rate. A high inflation rate is gonna be very had for our seniors.
If you believe big government is the solution then you are a liberal. If you believe big government is the problem then you are a conservative.

elmerfudd

Quote from: Dan on March 20, 2012, 07:30:53 AM
Also think about people on fixed incomes like social security and pensions.

Basically the value of a dollar follows an inverse curve to inflation. 10% inflation means a dollar is worth 90 cents next year. But you know that social security and pensions will not rise at anything close to that rate. A high inflation rate is gonna be very had for our seniors.

And even if they do rise at close to that rate, it may make the inflation worse as more money is chasing the same goods and services.

But we've had 10% and higher inflation before and I don't recall any great suffering.  Hyperinflation is another matter.  We've never had it in this country, and I frankly don't see it coming any time soon.  One thing that hyperinflation does real fast, unless there is some governmental "indexing" to stop it, is shift resources from savers to borrowers.  So if you see it coming, borrow LOTS of money. As much as you can.  Then spend it on something tangible.  Like real estate.  Or gold. 

I will recommend it again for those who would like to know what it was like to live in a period of hyper inflation.  The Great Inflation by William Guttman and Patricia Meehan.  I am going to dust my copy off and read it again real soon.  Very interesting and entertaining book.