The Coming Cash Tsunami

Forbes ^ | 12/29/2008 | Thomas C. Scott

[bruinbirdman]

Although deflation appears to be the immediate threat as prices for real estate and commodities have collapsed, this period of deflation is not being driven, as one would expect, by a shrinking supply of money but by fear. Cash is being hoarded at record levels.

New cash is being injected by the government to such a degree that, together with hoarding and growing investment in the U.S. by overseas investors, we are actually in massive cash bubble. Just like any other bubble, this one will eventually burst. The effects promise to be profound.

In the tsunami of Dec. 26, 2004, there were many videos of the odd behavior of the ocean at beaches to the east of the underwater earthquake. Just before the huge waves rolled in, the ocean receded far below normal low-tide marks, in some cases accompanied by a sucking sound.

There is a sucking sound today in our ocean environment of cash. Everything that can be converted to cash is being or has been sold: stocks, commodities, real estate, collectibles, and so on. We're in the trough of deflation. No one wants to own anything that has even the slightest risk associated with it.

People are in the grip of abject fear and putting so much of their money into short-term government Treasury bills that interest rates are nearly zero.

Individuals have stopped spending and are now trying to save. Corporations have pulled back their capital spending following a period when they had already been sitting on mountains of cash built up during the boom years of the 1990s and the real estate bubble. The total value of money-market mutual fund assets, a measure of idle cash, is at record levels, approaching $4 trillion, according to the latest report from the Investment Company Institute, an industry trade

[familyop]

What might trigger the private spending behavior that could start a “cash tsunami?”

[LegendHasIt]

Well, I can’t speak for anyone else, but I’m really looking for a safe place to spend some cash.

I have no faith in the banking system any more, and one account has much more than the FDIC will cover, so I gotta figure out where to put it. (and I don’t have much faith in the FDIC anymore either, so I want something even safer and surer.)

The tricky part is to put it in the right place before the (maybe) deflation ends and the (almost certain) hyper-inflation starts.

There are some decent Real Estate bargains now, but I hesitate, because there are going to be some super-major bargains in six months or a year.

Timing is the key. And the ‘experts’ opinions are probably worth even less than mine.

No telling what their agenda is. Mine is merely to not lose any more money than I have in the last year. ( I should have gotten out when I first thought it would be wise to do so. ‘Hope’ and procrastination cost me enough to live on comfortably for 4-5 years or so.)

[BunnySlippers]

Bookmark

[Brad from Tennessee]

If this scenario plays out most of the emergency loans and investments by the Treasury this year will be repaid with interest. Bush will have a better legacy. Congress will go on an historic spending binge. But, this bridge has to appear before we cross it.

[dennisw]

hmmmmmmmmmmmmmmm

[LegendHasIt]

Oh, and I have no faith in municipal bonds as the article is touting either. SOME municipalities might be relatively safe, but not many would I trust for more than REALLY short term. As tax revenue falls across the nation... states and cities.... few will be able to pay their obligations. And the more they raise their taxes to try to cover those obligations, the faster their revenues will fall.

And with the FED printing money so fast that the bearings in the presses are glowing red hot, those dollars are going to soon be worth less than the ink that they are printing with.

[bruinbirdman]

"and one account has much more than the FDIC will cover"

Accounts now insured to $250K. Multiple accounts are fine. Treasuries are safe.

At the first sign of the inflation uptick, and the bear flattens, look for old line consumer based equities (utilities, KMP, JNJ, MO) with dividends. They should keep pace with inflation.

yitbos

[dennisw]

No telling what their agenda is. Mine is merely to not lose any more money than I have in the last year. ( I should have gotten out when I first thought it would be wise to do so. ‘Hope’ and procrastination cost me enough to live on comfortably for 4-5 years or so.)

Put yr cash in a safe deposit box or buy TBills. A few CDs from solid banks
This works great until hyper inflation comes and it won't come as soon as many think

[LegendHasIt]

Sorry guys... Thanks for the advice, but I have no faith in cash, beyond the very short term, anymore.

EVERYTHING necessary for a repeat of the Weimar Republic is in place right now, and only a miracle will prevent it. Certainly none of our present and coming politicians and their appointees will.

[Lancey Howard]

Well, I can’t speak for anyone else, but I’m really looking for a safe place to spend some cash.

Fertile ground.

[bruinbirdman]

" have no faith in cash"

Buy canned tuna fish.

yitbos

[LegendHasIt]

Already have more than enough ‘bullion, beans and bullets’.... (and a great piece of commercial real estate on a long term lease to a major regional utility.)

[Jack Black]

The tricky part is to put it in the right place before the (maybe) deflation ends and the (almost certain) hyper-inflation starts. Gold. Perhaps Yen and Euros?

[reaganaut1]

Oh, and I have no faith in municipal bonds as the article is touting either. SOME municipalities might be relatively safe, but not many would I trust for more than REALLY short term. As tax revenue falls across the nation... states and cities.... few will be able to pay their obligations. And the more they raise their taxes to try to cover those obligations, the faster their revenues will fall.

I bet their would be a federal bailout for state and local governments if defaults started occurring on a large scale. The Congressional Dems will take of government workers, their base. I think munis are a buy. The real danger IMO is not an explicit government default but an indirect default through high inflation.

[servantoftheservant]

bump

[Leisler]

Peikoff.com > The Ominous Parallels

with an Introduction by Ayn Rand

"If you do not wish to be a victim of today's philosophical bankruptcy, I recommend The Ominous Parallels as protection and ammunition. It will protect you from supporting, unwittingly, the ideas that are destroying you and the world."

— Ayn Rand

Home Introduction Chapter 1: The Cause of Nazism Author Interview Contents Reviews Order Online Banners

Each of the philosophic principles essential to the rise of Nazism in Germany has a counterpart in present-day America. Is the freest country on earth moving toward totalitarian dictatorship? What were the factors that enabled the Nazis to seize power in pre-war Germany? Do those same conditions exist in America today? These are the questions raised — and answered, with frightening clarity — by Leonard Peikoff, Ayn Rand's intellectual heir, in his powerful book The Ominous Parallels. "We are drifting to the future, not moving purposefully," Peikoff warns. "But we are drifting as Germany moved, in the same direction, for the same kind of reason." Some of the "ominous parallels" between pre-Hitler Germany and the United States that Peikoff identifies are: Liberals who demand public control over the use and disposal of private property — social security, more taxes, more government control over the energy industry, medicine, broadcasting, etc. Conservatives who demand government control over our intellectual and moral life — prayer in the schools, literary censorship, government intervention in the teaching of biology, the anti-abortion movement, etc. Political parties devoid of principles or direction and moved at random by pressure groups, each demanding still more controls. A "progressive," anti-intellectual educational system that, from kindergarten to graduate school, creates students who can't read or write — students brainwashed into the feeling that their minds are helpless and they must adapt to "society," that there is no absolute truth and that morality is whatever society says it is. A student radical movement (from the 1960's through the violent anti-nukers and ecology fanatics of today) who are, Peikoff maintains, the "pre-Hitler youth movement resurrected." The radicals are nature worshippers who attack the middle class, science, technology, and business. The rise of defiant old-world racial hatreds disguised as "ethnic-identity" movements and "affirmative action." A pervasive atmosphere of decadence, moral bankruptcy, and nihilist art accompanied by the rise of escapist mystic cults of every kind — astrology, "alternative medicine," Orientalists, extrasensory perception, etc. In an introduction to Peikoff's book, Ayn Rand describes The Ominous Parallels as, "the first book by an Objectivist philosopher other than myself" and goes on to say that, "If you do not wish to be a victim of today's philosophical bankruptcy, I recommend The Ominous Parallels as protection and ammunition. It will protect you from supporting, unwittingly, the ideas that are destroying you and the world." In brilliantly reasoned prose, Peikoff argues that the deepest roots of German Nazism lie not in existential crises, but in ideas — not in Germany's military defeat in World War I or the economic disasters of the Weimar Republic that followed, but in the philosophy that dominated pre-Nazi Germany. Although it was mediated by crises, Peikoff demonstrates that German Nazism was the inevitable climax of a centuries-long philosophic development, preaching three fundamental ideas: the worship of unreason, the demand for self-sacrifice and the elevation of society or the state above the individual. "These ideas," Peikoff says, "are the essence of Nazism and they are exactly what our leading universities are now spreading throughout this country. This is the basic cause of all the other parallels."

Copyright © 2001 Leonard Peikoff. All rights reserved. May not be reproduced in any form or manner whatsoever without the express permission of Leonard Peikoff. Site by Integrate Design.

[RoadTest]

“New cash is being injected by the government”

If The Federal Reserve System is not part of the government but a consortium of private banks, whio is “injecting cash” into our economy?

[RoadTest]

(sp.) “who”

[Uncle Miltie]

This is impossible because the Fed never inflates bubbles with loose money.

< / sarc>