Posted on 03/11/2013 4:09:06 PM PDT by Lorianne
What about commodities:food and oil etc.
You nailed my thought process.
And I can’t help but to focus on US Oil production.
In a true deflationary cycle with the US as a major producer and exporter of oil/gas/energy, this should drive the cost for us in the US down.
And as a result,we should see a major US dollar rally.
Thanks,
And in addition it must be said again if necessary;
Deflation is a Bitch.
It’s the Queen of spades.
It hurts, and won’t go away.
Ask Japan,
The Fed is trying not to be Japan, by being Japanese.
Totally F*** Up, but they have no other choice.
They have tools to fight inflation, but nothing to fight deflation, except to create inflation by printing money.
The issue comes down to this;
The fed stops buying US treasuries because .....they decide their balance sheet can’t take anymore.
BTW, their standing buy orders are a green light for primary dealers to take the spread and exercise their algo’s to push equities higher.
The Fed withdraws, the equity markets retreat, and the cash from the sale of equities become the new treasury buyers in lieu of the Fed.
Wash, Rinse and Repeat.
Until the next best greatest thing; read bubble.
Wash, Rinse and Repeat.
It is true that since the Fed does not control taxation and regulatory policies they cannot stimulate true organic growth in the domestic economy. True that deflation is the Ace of Spades. Direct result of criminally corrupt governmental actions from both parties, but extremely accelerated by Socialist power-grabs from the Left. I bought some Phillips 66 stock in November and it’s up 22% since I bought - can’t get through the regulated refining processes fast enough to get it to market. They are very healthy internationally as well.
The expectation that the Fed will stop printing when the Balance Sheet can no longer bear it would require responsible, accountable leadership who acknowledge the problem and stop digging. This I do not see on Obama’s watch or from congress. Hell, he wants a permanent Stimulus slush fund in the annual budget. By the way, just how many budgets has Hussein gotten passed in his 4+ years in office?
If Rogers were right then gold would be rising and the dollar would be falling. Just the reverse is happening now.
Why?
The fed is printing a couple trillion fiat dollars from nothing. That’s bad.
However, the fracking revolution has just created 50-100 trillion dollars worth of US hydrocarbons. That’s better backing than gold in fort knox.
The promise is that the US will become oil independent within this decade. Anyone watching developing action in the permian basin will know this to be true.
Oil independent countries are generally not weak currency countries.
I pray that this ray of hope doesn't diminish what little momentum we have developing for fiscal responsibility.
How are we going to be ‘oil independent’ unless we nationalize our oil and gas resources? Those will be sold at the highest price on the international market, which means we are in competition with everyone else for use of those resources.
You got that right. You can't even begin to put an accurate value on anything. The Fed's massive intervention has distorted the market so badly that asset prices are essentially meaningless.
Or a few eggs... Have you seen that picture of the $1 million Zimbabwe note with the three eggs?
What I’m concerned about is a currency reset after a bank holiday.
Before the bank holiday, you have $3k in your checking account and a $100k mortgage. After the bank holiday, you have $300 “New Dollars” in reset currency in your bank account, and your mortgage is still $100k (New Dollars).
Barring a currency reset scenario, it would be logical to have as much under loan as possible,
so you can repay it with inflated currency.
Why?
My thought has it that the US government is manipulating the price of gold and silver through daily actions on metal markets, with losses on those markets being covered by fiat money printing, ie money without gold or silver metal backing. Behind my thought is the apparent stability in gold and silver prices while unfunded trillions, in US liabilities, are building up.
Prayer is of little use since 95% of our leaders treat our tax dollars like a drunken sailor on weekend leave.
I certainly hope so but it hasn’t reached the little guy yet and he’s going backwards.
Very good and all investments can only be analyzed versus an alternative. So you have to have a rational reason to avoid risk and that’s a higher risk adjusted return.
That’s nonsense. What’s the cause of deflation? If it is increasing productivity then deflation is a good thing.
I don’t understand the logic of investing in ‘income producing property’ as a hedge against inflation, depression, etc. If/when that occurs it’s quite likely the tenants will be unable or unwilling to pay the lease/rent. Then it’s the owner vs. the resident and there aren’t many laws in favor of the owner. And the re-sale value in that scenario is a loss.
I see financial repression occuring (inflation of goods and services and deflation in wages and savings). QE is going into the banks, bonds and stocks, it is not to consumers. The amount of QE spending equals the amount of federal deficit spending. That’s a clue! IMO it’s being done to protect the banks’ solvency in return for them lending to the federal govt.
An increase in productivity is something business is always trying to achieve. This tends to accelerate when the economy slows, as they are squeezing more from fewer employees.
The FED has worked very hard to fight this current deflationary cycle.
Read the definitions below:
Definition of ‘Deflation’
A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Central banks attempt to stop severe deflation, along with severe inflation, in an attempt to keep the excessive drop in prices to a minimum.
The decline in prices of assets, is often known as Asset Deflation.
Investopedia explains ‘Deflation’
Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals. To counter deflation, the Federal Reserve (the Fed) can use monetary policy to increase the money supply and deliberately induce rising prices, causing inflation. Rising prices provide an essential lubricant for any sustained recovery because businesses increase profits and take some of the depressive pressures off wages and debtors of every kind.
Deflationary periods can be both short or long, relatively speaking. Japan, for example, had a period of deflation lasting decades starting in the early 1990’s. The Japanese government lowered interest rates to try and stimulate inflation, to no avail. Zero interest rate policy was ended in July of 2006.
That might require impeachment of a President.
So we have a pro-inflation FED. Deflation isn’t a bad thing. If you’re deflating over time, say 3% a year due to productivity gains it’s just fine. You could have flat income on delfating prices (as long as the real gains to productivity outpace population growth) and actually have an increase in purchasing power without an increase in taxes on said income.
In past deflations prices fell as fast as or faster than wages. Why the FED is pro-inflation is that they’re bankers managing an economy. The FED has worked very hard for bankers to fight this current deflationary cycle.
You don’t need a little inflation to have a growing economy. It’s a nonsense argument made in business schools and believed by too many economists and MBAs. The FED caused the current crisis and it started decades ago under Clinton. Central planning of economies doesn’t work.
I’m sorry, but deflation is NOT GOOD.
Prolonged deflation is one of the worst things that can happen to an economy. While your buying power goes up, the value of the assets you buy continues to go down.
You need to take a closer look at Japan which has been dealing with this for close to 20 years. They have had a zero interest rate policy and their citizens still save more and more money with NO return.
You can track what is happening in Japan to what we are doing in the US, and we are following the same track.
Japan has recently undertaken another massive effort to devalue their currency.
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