Posted on 08/25/2010 8:45:22 AM PDT by Bigtigermike
Investors will face defaults on government bonds given the burden of aging populations and the difficulty of securing more tax revenue, according to Morgan Stanley.
“Governments will impose a loss on some of their stakeholders,” Arnaud Mares, an executive director at Morgan Stanley in London, wrote in a research report today. “The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.” The sovereign-debt crisis is global “and it is not over,” the report said.
(Excerpt) Read more at sfgate.com ...
I certainly agree with that.
Right now I don't understand why we aren't into inflation based on all the money printed in recent years.- tom
CA is on a course towards de facto bankruptcy. I think the tipping point into a severe crisis will arrive when Wall Street brokerage firms decide that it’s too risky for them to continue talking wealthy clients into buying CA muni bonds. At that point CA will be unable to sell bonds except at much higher junk interest rates and then the state will probably run out of cash and be unable to pay all its bills. Only then will there be enough political pressure to make serious structural budget reforms (like canning 30% of the bureaucrats in Sacramento.) But will reforms be too late, as the middle class leaves CA in disgust?
We’re not into inflation yet because productive capacity and supplies of goods have not been reduced because of war, drought, etc., and demand is way down because of the recession. But when demand picks up in 2-3 years then we’ll certainly see commodity inflation in oil, gasoline, and food. General inflation may stay reasonably low, however, because of high productivity and slow wage/salary growth. But overall prices will still be incrementally higher because of all the money printing.
Yeah, that and every 401k, savings account and asset of nearly every type will be worthless. It would mean a complete currency collapse and a deflation the like of which has not been seen in the USA.
The only things of value will be land/shelter, food, gold/silver, livestock and guns.
It is what it is. I thought everything was deflating in price. Scratch that! Everything unessential is falling in price while everything essential is inflating.
I would add ammo to the essential side in hard economic times with a Marxist president pushing us into Socialism, and the Amish youth are poised for unrest.
I just don’t understand what is keeping ammo prices so high unless people are stocking up to the rafters, buying ammo as fast as it is being produced.
This is not an academic question. I want to get several cases and I would prefer not to do that right before ammo falls back to normal prices. That is my whole point for asking. It ammo prices are here to stay, then I want to stock up now.
I forgot that there has been a run up in the commodity markets with metals. Since we are heading for a depression, I would think commodity prices would soften and demand would weaken. I guess we will see. Time to stock up anyway, I guess and double down if prices come down.
I would say “time to buy a reloading press” but if metal is up then brass casings are up too.
Does anybody know if the cost of casings and bullets have gone up as fast as the finished cartridges? Are high ammo prices because manufacturers can’t meet demand or is it that their costs have gone up paying more for brass and lead?
Thanks for the help.
Compared to 3-4 years ago, brass and lead/bullets are fairly flat. Powder and primers are up, but not WAY up.
First, deflation is outpacing inflation. The amount of debt being destroyed in bank failures, business bankruptcies and home foreclosures is greater than the increase in money supply. Actually it is a LOT greater, because a lot of the printed money has gone to banks who are holding it in reserve and not lending on it.
What inflation we have is being masked for the most part. Instead of raising food prices, a lot of packages are shrinking in size, giving you less for the same price. You can also hide inflation by selling the same product at the same price but reducing quality - using inferior materials than you used to use, or taking shortcuts in assembly or production. The inflation is the inferior quality of the product, not the increase in price.
For example, Levis jeans may be $40/pair but they wear like iron and last forever and carry a lifetime warranty. I had some thread unravel on 3 year old jeans and they were swapped for a new pair. (No, you can’t count your kid wearing out the knees - wear isn’t a defect).
Contrast this with the Chinese jeans I got for only $8. A screaming deal, right?
Well I’ve gotten more than 5 years easily from Levis jeans. That is $8 per year of use.
The Chinese jeans lasted 3 months because the front pockets ripped out of them. For whatever reason, the manner in which they sewed in the front pockets, they perforated the material and it ripped right along the stitching, rather than sewing it in a reinforcing manner like Levis does.
$8 for jeans every 3 months is $32/year.
So in 5 years I can pay $40 for one pair of Levis or go through 20 pair of $8 Chinese jeans the same 5 years, at a total cost of $160.
I call that inflation, not deflation. When you spend more overall on the cheaper product because it does not last or does not do what it needs to do, that is inflation not deflation.
Scrap copper is at a low, so the only thing keeping the price up is demand, as far as I can tell. I'm just glad that there is a supply. Close your eyes and remember what the shelves looked like empty, and act accordingly.
Yep, CA sucks now in so many way as a great Democrat Utopia experiment in giving the CA Treasury away along with great wealth distribution and massive exposure to lawsuits for everyone.
Don't know how it ends, but they either have to stop spending or find ways to confiscate private wealth. Which do you see them trying to do first?
Your statement above has me stumped. I thought currency collapse leads to hyperinflation, not deflation. If the dollar collapses people lose confidence in it and refuse to take it. The government prints more dollars to cover the new prices demanded and when the vicious cycle runs its course, paper money has less value than toilet paper and people are using gold for money.
How can a currency collapse lead to deflation? I don't understand how that can happen.
Then that doesn’t explain the huge increase in prices. Well, then maybe it IS time to get a reloader. lol.
You'll get four or five uses out of each of the brass cases you already have, as opposed to one, for starters. Bullet and powder prices seem stable, so I'd consider counting up your rounds, multiplying by 4 and buying powder, primers and bullets to refill.
A decent LEE set-up can be had for $200, plus dies.
I think you are wise. Dollar cost average my ammo purchases. Over the last 3 years I just didn’t buy any, waiting for prices to fall. I can’t wait forever. I’m going to take your advice.
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I’m not a lawyer, but I would assume Prop 13 has already been challenged a few times and has been upheld as constitutional by the courts. I think it’s highly unlikely that the SCOTUS would throw out Prop 13 on a new challenge.
The dems in the legislature will probably try more tax increases and some budget cuts to close the deficit, but the tax increases won’t generate the expected revenue because people will simply do less of any activity that is taxed (Laffer curve in action.) Ultimately there will probably have to be major reductions in the vast Medicaid program that drains off a large part of tax revenues in CA. When the choice ends up being Medicaid cutbacks or closing the schools and watching the middle class leave the state and cause a complete economic collapse, the legislature will probably decide to cut back on the massive, fraud-infested Medicaid program. That’s the most likely end game, but with all the crazy legislators and judges in CA, anything is possible, including even the possibility that a federal judge might throw out the part of the CA constitution that makes payments on bonds the top priority in the budget.
The cycle you describe in your post can be accelerated...virtually bypassing the hyper-inflation.
If the US Govt defaulted on it's $13T+ debt...the US dollar would be virtually worthless. Nobody would want it...even if it had not been inflated. The only money around would be gold and trading...perhaps some form of foreign or new US currency, but only if it forms under a NEW GOVERNMENT.
There would be very very little "money" chasing an abundance of goods.
Thus, deflation.
Banks aren’t lending their infusion. They’re buying bonds from the Fed and safely collecting the interest. That’s why another QE is coming.
Don't forget LBJ removing silver from the coinage. Everybody talks about Nixon closing the gold window, but that only affected central banks. Taking the silver out of our coins affected Americans.
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