Posted on 03/04/2009 1:25:30 PM PST by 2ndDivisionVet
In the last five months, according to the Federal Reserve Board, the money supply in the United States has increased by 271 percent. It has almost tripled.
Have car sales tripled? Home purchases? Consumer spending? Corporate investment? Not only have they not tripled, they have all declined more sharply than they have since at least the recession of 1981-82, and perhaps since the Great Depression.
So where is the money? If it isnt being spent, where is it?
It is being parked, squirreled away. Consumers are using it to pay down their credit card balances, pay off their mortgages, reduce their student loans, make the payments on the car sitting in their driveway not the one in the dealers lot. Businesspeople are buying T-bills, investing the money and saving it. They arent spending, either.
But one day this recession despite Obamas best efforts will end and things will begin to look up again. Then we can expect all of this money to come out of its parking space and get back on the highway of commerce. All at once. The inevitable result will be double-digit hyperinflation.
Since the spending and borrowing splurge is not confined to Washington, but is being mimicked all over the world, the inflation will not strike just one country but will be global in scope. The first global inflation in our history (except, perhaps, right after World Wars I and II), it will confront our policymakers with yet another unprecedented challenge and send them back, once more, to their economics texts. There, they will find that the only remedy for global inflation is global recession, a la Paul Volker. Having just emerged from a ruinous depression, nobody will be in the mood for more unemployment, but that is just what will have to happen to cool off the inflation and break the inflationary psychology that is likely to set in.
The point of this gloom and doom is that all this pain is entirely preventable. It will be caused by Obamas excessive spending and trillion-dollar-plus deficits. This spending, of questionable utility in overcoming the current recession/depression, is so far out of line with what the economy can handle that it will do more harm than good when the inflation hits.
Proof that his spending will have little impact on the depression is the vast increase in money supply with no commensurate improvement in the economy. Providing money, via spending hikes or tax cuts, does not guarantee that the money will be spent. Tax cuts can be saved and spending increases, while surely spent once (on the initial project), can rapidly lose their multiplier effect as wage-earners on the government payroll bank their money just like those who get tax cuts will do. Getting out of this economic mess depends on consumer and business confidence, a faith that Obama is eroding with his looming tax increases as rapidly as he tries to kindle it with his excessive spending.
None of this should come as any news to Obama. He likely knows all this. But he is determined to pass his agenda of bigger government, nationalized healthcare and vastly greater spending even at the price of inflation and subsequent recession. He puts ideology first and the economy a distant second.
The stock market has figured out his priorities and is responding accordingly. One can only hope that voters also eventually realize what is going on.
Those of us in Duluth, Mn. were lucky as far as gas lines go. We were not one of the big population centers.
Friday and Sunday nights could get hairy, though
ping
A company called Delft in Nederlands is actually manufacturing silver out of other substances
No one knows yet what they are making it out of.
Then there are the guys who found a potassium or phosphorus isotope that's actually the long sought after "transparent aluminum" made up purely of aluminum crystals ~ not in combination as a sulfite for example. No doubt true transparent aluminum will turn into a tradeable commodity as soon as they figure out how to separate it from the other kinds of aluminum crystals. The fact that it was mistaken for a potassium or phosphorus isotope for a century should give us a clue on how easy this is going to be.
Delft says it's not making gold at this time.
Mortgage rates and fees are about to go through the roof when the law gives judges the right to lower the principal of your loan. As if housing didn’t have enough problems.
And I said it earlier in the year, O’s mortgage bail out is all smoke and mirrors. Those who are “credit worthy” aren’t behind in their payments.
The result is a substance that's chemically "identical" to some other element ~ but maybe with some minor differences here and there AND, best of all, with a different atomic weight than you'd otherwise have guessed.
Let's say you can take hydrogen and helium and squeeze them together such that they form a substance that's chemically identical to titanium. The big deal would be that it would still weigh less than air. You could build super strong metallic structures lighter than feathers and able to be tossed about by modest magnetic fields. (NOTE: Not that you can do that but I'm sure you see the idea).
One of the favorite deals being done by the guys into "super atoms" is to take a gold film maybe 2 microns thick and then build never before seen in nature crystals on top of that film using other elements. They start the first layer of the crystal by squeezing the gold nucleus into close proximity with the nucleus of the other element(s) and then go from there.
This is the exact opposite of creating a substance and then gold plating it ~ here you start with the plating and build the substance TO THE CHARACTERISTICS YOU WANT.
I'm busy trying to find some company that's got a commercially marketable product built this way.
Note, if you think the current financial collapse is really bad wait until this stuff hits the market and undercuts all products, all commoditities, and everything else you can think of. Everybody will feel like the buggy whip manufacturers when Elwood Haynes and Karl Benz started rolling real production automobiles out the door in 1894.
Dick gets a lot right.
Obama is COUNTING on hyperinflation on the money supply and fixed rates on the national debt. The people holding t-bills will be screwed royally getting paid in paper money that is worth far less than a year ago.
Cash is a doomed investment. That much is easy enough to understand.
but...
What to do with it?
When?
Will the onset of inflation be sudden, or will there be a ramp?
Will there be a separate, delayed bottom in other asset classes, like real estate?
Will the signs be clear? Will I miss them?
Will I jump prematurely at a *false* sign?
If you think there is a risk of unrest and disruption, then invest in tangibles you keep on hand, like storage food, guns and ammo, etc. If you have more to invest, then buy “junk” (1964 and older) silver coins, and gold bullion coins. www.tulving.com has good prices and is reputable.
Keep in mind that your objective should not be to time the bottom to buy in. If you believe inflation is inevitable, then enjoy the current period (a year or more?) when you can still buy all these things at reasonable prices. The longer you are “wrong” (gold goes down, not up) the better off you are because you can buy in more cheaply, and secure your position for the inflationary period.
If you currently have a big wad in cash or stocks, then you could take the risk of buying all on one day, Wich I don’t advise. Instead, put in 10% each month for 10 months and average out the risks. If you are feeling lucky, buy on the day each month when it looks like gold (or your chosen item) has dipped more than expected. If you will be investing out of earnings for the next year, then you actually want gold (or whatever you’re buying) to go down so you can buy more before it takes off.
If you believe that there could be nasty disruptions, then consider whether you would be better off having your assets in a brokerage account, safe deposit box, a hole in the backyard, or something else. If you are keeping any on hand, seriously weigh the risk of theft (home invasion gun to the head) so practice EXTREME secrecy, even if you’d like to show off your glittery treasure. And don’t put all your eggs in one basket, and be creative.
Also, one of the great inflation hedges is DEBT. But only fixed rate long term debt. Be sure your house is financed with a long-term mortgage at a fixed rate (under 5 or 6%) if you can safe a point by refinancing, that’s nice, but the real difference will be ~5 years from now if interest rates are 15%, and you’re paying off your loan with dollars that have a small fraction of their current value. Don’t even consider variable rate loans (though a line of credit can make sense just to have on hand).
In the ideal world, you’ll have enough saved in tangibles (like gold coins) to pay off your mortgage if you wanted to when inflation has increased the price of gold by 4 times. that means putting 25% of your mortgage dept into tangibles.
Not that I advocate paying off the mortgage should that come to pass. You should average out of a major asset just like you average in.
Basically, if you really believe things are going to go inflationary, then there is an easy way to win (or at least preserve your wealth while most others are losing theirs). The real challenge is deciding when the crisis is over, and when to sell what you bought to get you through the crisis.
Try not to worry or fear, because you must remember the lesson of JOB in the Bible:
“The thing I feared the most has come upon me”>>>and life works that way. We discuss some worst case scenarios, but truthfully we will do better if we push fear out the window, and know that God will help us all.
if you have high job security, should you be spending money now in anticipation of this type of inflation?
You should buy inflation hedges that are resellable at market price (not just “spending” on vacations, jet-skis, etc.)
What do you suggest buying that can be resold at market value? Curious.
Obama is COUNTING on hyperinflation on the money supply and fixed rates on the national debt. The people holding t-bills will be screwed royally getting paid in paper money that is worth far less than a year ago.
This is one of the reasons, IMHO, that BO is moving so fast. He wants to get all this done before (other than the stock market), the financial affects start hitting EVERYONE.
BUMP
1930's style income tax rates come to mind.
This is the year, top rate and top bracket.
1932 63 1,000,000
1933 63 1,000,000
1934 63 1,000,000
1935 63 1,000,000
1936 79 5,000,000
1937 79 5,000,000
1938 79 5,000,000
1939 79 5,000,000
I'd be careful buying silver.
Elemental transmutation? That'd be a real neat trick. Ain't happening unless you are talking about someone faking silver.
Then it's not real silver.
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