I’ve been yelling what you’ve said for two years.
Mike “Mish” Shedlock has major blog-rantings about the deflation we are headed for and are in.
What all of these bloggers are confusing is the definition of inflation/deflation and inflationary/deflationary effects.
Inflation is the increase of money supply (including credit).
Deflation is the decrease of money supply.
Inflation has both inflationary and deflationary effects in an economy. All you have to do is look for them and you’ll find them. The same is true of deflation.
After a period of massive inflation, there will be an overall trend of inflationary effects, and this is usually followed by a period of primarily deflationary effects, much like the hangover after a wild binge.
The reason that we are not seeing inflation twice as bad as we would expect after the latest rounds of QE is that the QE was in the form of credit to the primary lenders through the discount window of the Fed. The primary windows did not push this money/credit out to the street in the form of secondary loans. Instead, they’ve been investing it in the equities markets to prop them up 1. to make the economy look better than it is, and 2. because the public-sector pensions and benefits are funded largely based upon the markets. If the markets crash, union benefits and pensions also crash and we will be faced with “austerity” like in Greece. I believe the government and Fed have colluded to force this use of QE for this purpose and as a pay-off to the mega-financiers who financed the current administration.
The takeaway here is that our entire monetary system is based on nothing real and is financed by constant debt. This system must collapse eventually, as they always have and always will.
The other takeaway is that, as always, we will see inflationary and deflationary impacts in this debt spiral. Most importantly, all the assets that you thought will hold value (your home, your boat, secondary investment properties, etc.) will depreciate in value as no one has the money to purchase these things and that the cost of the necessities (food, fuel, etc.) will skyrocket.
Gold and silver will appear to skyrocket in price, but this will mainly be a sign of the dying dollar. They will hold their purchasing power relative to the dollar they were purchased with for as long as there are people to buy them.
With this in mind, I recommend people to get out of the markets, get cash, and spend it on the necessities they will need for ten years. I know, easy to say and hard to do. But it is a good idea, if at all possible, to prepare for an entirely new lifestyle, one much like our ancestors of the 19th century.
thanks for this
on gold, I liked a comment I read that precious metals are a way to try and preserve wealth, not increase it
I can store lot more (small) gold silver and even copper coins for 10 years than I can food, battereis and toilet paper .. people have and will always need some kind of “money” - so that is my (hopeful) goal
Very good post...