best deflation argument I've seen

[Verrocchio]

Re: best deflation argument I've seen

I figure the best thing to do is prepare for inflation now since it's a given that it will come eventually.

Good figuring, K. From a personal consumption/savings perspective, in the timescale of the great economic turmoil we're experiencing, one year, give or take, is a blip. Preparing now is probably a good idea.

On the other hand, we need to refine the time dimension further for investment purposes. So far, EJ's prognostications have been shown to be more reliable than others that I read.

[cjppjc]

Re: best deflation argument I've seen

One of the best threads on this site. Which is saying something. I love it when I read one thing and can see the point. Then read the opposite and see the point. It's why I never sell. Ugh.

[cjppjc]

Re: best deflation argument I've seen

There are others, and also other factors you didn't mention... but not as many are learning as what I would hope. *sigh*

Well....?

[touchring]

Re: best deflation argument I've seen

If the federal government were to say make every $1 starting in 2010 equal to $100 along with language preventing the adjustment of existing contracts, the California budget problem would be fixed right quick: 100x the income and the previous outlays.

As for who will pay, surely you know that ultimately it is always the people who pay? The only question is how much, how long, and how painful it will be.

From my view the answer to each of these questions continues to grow.

Yes, but that will be letting off the debtors, why should Goldman Sach do that? That will mean the $1 million per employee bonus is now worth only $10k. Assuming that US government policies are controlled by banks, why will they let the government undermine their interests?

Taxing the middle class to pay off the deficit is less painful for Goldman. Wealthy Americans remains wealthy, Asia continues to finance American trade deficit, Goldman's East Asian business booms and GM sells more cars in China. Bankers make the most money if status quo remains. Why rock the boat and risk an uncertain future?

[HisHighnessDog]

Re: best deflation argument I've seen

...For every dollar spent in the economy (govt and consumer) the best way to get the highest rate of return is to have Govt do to less of the spending. Hence small govt leads to greater growth (ie your Ronald Reagan years or early Clinton years)....

You've got your facts wrong above. Please go to the OMB website (http://www.whitehouse.gov/omb/), pull down the .pdf of the US national budget. The last time I did it, the data -going all the way back to 1980- showed that there has not been a single year -under Republican or Democratic administrations- in which Federal employment rolls or spending went down.

The 'Conservative Revolution' was never about actually having small government. It was about talking about having small government. Oh, and while I'm on it, it was never about real prosperity (as in trade surpluses), it was about imagined prosperity (using debt to spend money one hasn't yet earned).

Real conservative,
-HisHighnessDog

[grapejelly]

Re: best deflation argument I've seen

Investing and preparing is pretty simple if you think about it.

1. Buy food and stockpile it.

2. Buy consumer goods and stockpile.

3. Buy firearms and ammunition

4. Buy gold and silver.

5. Diversify internationally.

It comes down to paper vs. what you can hold. Paper is an abstraction that falls in value with inflation. Inflation is the same as paper falling in value.

What you can hold = food, clothing, firearms, ammo, gold, silver, stuff. If you can't hold it, it's paper and not worth the ___ it's printed on in a really bad inflation.

Have to look at historical examples carefully. There has never been a long term use of fiat that has lasted very long. Most of history, money was commodity based. Even in the Great D, up until 1934, gold was money more or less.

Once the dust settles in the inflation I imagine this time around, there will be something replacing the US dollar, just as there always has been a "new" currency replacing the old.

Paper will be completely wiped out.

I don't expect this to start in earnest until 2010, and it may take place over a number of years. But in the end, paper will be worthless.

Good companies, good businesses, will always have value. There will be amazing bargains in stocks of great companies.

[flow5]

Re: best deflation argument I've seen

Statistics on overnight trading in the federal funds market			Excel
Bitmap	date	daily1		Range
		Bitmap
		[XML]		low	high
				[XML]	[XML]
	14-Jul	0.13		16-Jan	0.38
Bitmap Bitmap Bitmap
Bitmap Bitmap	13-Jul	0.13		0.05	Bitmap 0.38
	10-Jul	0.15		16-Jan	0.38
Bitmap Bitmap Bitmap
Bitmap Bitmap	9-Jul	0.15		16-Jan	Bitmap 0.38
Bitmap Bitmap	8-Jul	0.16		0.05	Bitmap 0.38
	7-Jul	0.18		16-Jan	0.38
Bitmap Bitmap Bitmap
Bitmap Bitmap	6-Jul	0.18		16-Jan	Bitmap 0.38
Bitmap Bitmap	4-Jul	Bitmap Holiday - No data.
	3-Jul	0.16		0.05	0.38
Bitmap Bitmap Bitmap
Bitmap Bitmap	2-Jul	0.17		16-Jan	Bitmap 8-Mar
Bitmap Bitmap	07/01*	0.2		0.1	Bitmap 8-Mar
	30-Jun	0.22		0.01	7
Bitmap Bitmap Bitmap
Bitmap Bitmap	29-Jun	0.17		0.05	Bitmap 8-Mar
	26-Jun	0.18		0.05	8-Mar
Bitmap Bitmap Bitmap
Bitmap Bitmap	25-Jun	0.19		0.05	Bitmap 8-Mar
Bitmap Bitmap	24-Jun	0.21		0.1	Bitmap 2-Jan
	23-Jun	0.24		0.1	8-Mar
Bitmap Bitmap Bitmap
Bitmap Bitmap	22-Jun	0.24		0.1	Bitmap 0.38
Bitmap Bitmap	19-Jun	0.25		0.1	Bitmap 0.4
	18-Jun	0.25		0.05	8-Mar
Bitmap Bitmap Bitmap
Bitmap Bitmap	06/17*	0.24		8-Jan	Bitmap 8-Mar
Bitmap Bitmap	16-Jun	0.22		0.1	Bitmap 8-Mar
	15-Jun	0.22		8-Jan	8-Mar
Bitmap Bitmap Bitmap
Bitmap Bitmap	12-Jun	0.17		0.1	Bitmap 8-Mar
	11-Jun	0.17		0.05	8-Mar

FED FUNDS TRADED @.25% only 2 times in the last 32 days. Otherwise the actual FFR has been well below the renumeration rate on excess reserves. Thus the member banks have a disincentive to loan. But the FED is changing course again.

[MarkL]

Re: best deflation argument I've seen

Maybe California can start off by waiving off property tax for 2009.

http://www.itulip.com/forums/showthr...620#post109620

The problem is that California Property Taxes are County receipts, not State receipts. I'm not sure the state gov would have the legal authority, let alone the desire to waive them. The more common conversation in the state right now (unfortunately) is to try and overturn Prop 13 and RAISE property taxes to solve the budget gap.

However... I'm with you theoretically... :rolleyes: