Free Republic
Browse · Search
News/Activism
Topics · Post Article

To: vg0va3

why would you go with cash?

(Honest question)


8 posted on 06/29/2013 7:11:38 AM PDT by xzins (Retired Army Chaplain and Proud of It! True supporters of our troops pray for their victory!)
[ Post Reply | Private Reply | To 5 | View Replies ]


To: xzins
My thoughts are that in a deflationary economy the value of the $ relative to the cost of buying goods becomes greater.

Think in terms of what occurs in a deflationary economy. The cost of production is higher than the market price of the good. We are already seeing this in the gold market recently. The progression is as follows:

1) Prices drop

2) Business can make ends meet

3) They lay off employees

4) Those employees no longer can buy goods

5) Businesses sell less goods

6) Prices fall farther

7) How do you capitalize in a deflationary economy? Be one of the few with no debt and cash to buy goods at a lower price.

Think in these terms. If you have a skill/good and no one else has cash, what is the value of that skill/good? 5 Chickens and a cow from farmer John or would you take cash so that you could purchase what specific needs you have? You would accept the cash most likely because with cash you can buy 5 chickens and a cow.

What price would you take for my cash? Would it be 100 cents on the $. No, because I am the only buyer of your good/skill with cash and I would not pay that amount for your good/skill unless no one else had it. So I would use my cash to buy it at a much lower price than today with an inflated value.

Sure, the value of the $ may be lower relative to other currencies, but the fact that many currencies peg against the $ the effect should be somewhat mitigated.

That means to be prepared for deflation, have cash.

You will hear screams, and I was one of them at one time, that we are going to be hit by inflation, but ask yourself this questions. As the Fed has pumped trillions of $ into the economy what have your seen happen to GDP? No growth of value. Where is the inflation? I have been waiting and thought gold was an indicator, but that price has been driven by political concerns not economic. There isn't any because the money injected has been just enough to keep us falling into a deflation situation. To keep our leaders from having to explain why we can't get out of a depression with their policy.

The announced end of QE'ing is the notice to all that this is last call. Get your drinks and make for the door.

But, I am an economic ignoramus.

10 posted on 06/29/2013 8:09:23 AM PDT by vg0va3
[ Post Reply | Private Reply | To 8 | View Replies ]

Free Republic
Browse · Search
News/Activism
Topics · Post Article


FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson