Fed plotting how to achieve infinite money

[algerwetmore]

Re: Fed plotting how to achieve infinite money

My nightmare scenario is a US hyper-inflation and melt-down of the economy. By hyper-inflation, I mean something like 10% or 20% per year inflation.

In this scenario, there would be no safe places to put U.S. dollars.

Gold would be something like $2000 per ounce. Any takers? And how are you going to eat? Saw a piece off of your gold bar? Take your gold to the grocery clerk, and see if they would take it? ( Dream along with me! )

Bonds? The bond market would be all but worthless as interest rates would be in double digits. If you sell into this market, you just got wiped, and if you wait until maturity, you take the worthless pesos.

Even worse, Bernankee still is at the Fed, and he refuses to admit to more than 3% inflation in the economy. And no-one will pay double-digit rates of interest when the money is being adequately supplied thanks to the Fed.

Real estate? See what real estate would be worth if mortgage rates are 20%--- if you could even get a mortgage. The fact that banks are flush with cash doesn't mean that banks would be willing to lend on domestic mortgages. ( Banks have better investments abroad. )

Cash? It's peso time. (It isn't even good for wall-paper because the glue is too expensive.)

Stocks? The U.S. companies would be worthless because their earnings are in pesos. And few companies would be able to increase their earnings at a rate faster than the currency is going down.

Land? Your land is worthless because the taxes just wiped you out. And no-one can afford your land because they can not finance it.

Rental real estate? No-one can afford to pay the rents, and they turn your property into a drug-den if the do pay the rent. Either this, or your renter comes up with the rent by sub-leasing to several of his friends in a motorcycle gang.

Selling your labour? There is no need for your labour. And if there was, your pay-cheque would buy nothing anyway. To compound your problems, your retirement savings now buys a few postage stamps.

Farming? Your water bill, your potash bill, your diesel bill, your electric bill, your gasoline bill, your seed bill, your mortgage bill, your machinery replacement and repair costs just wiped you out.

In the nightmare scenario, everyone starves. The point is: everyone depends upon everyone else, and no-one would be able to escape the depression.

In a complete breakdown of the U.S. economy, the gangs and drug-dealers would control the land.

I wouldn't saw off part of my gold bar, but if we were at that stage of
hyperinflation, then a barter economy takes over.
And if you have to use money, then probably junk silver (90% silver coin)will be the currency of the masses.

[Spartacus]

Re: Fed plotting how to achieve infinite money

Anywhere that heroin was legal in the past, addicts cannot be distinguished from normal citizens, unless the addict chooses to publicize their addiction.

Most of the effects you see from "heroin" are from impurities.

Here's one famous case:
http://www.druglibrary.org/schaffer/...e_mccarthy.htm

The speculation is on the identity - there's NO speculation that Anslinger knew there was a heroin using congressman. When you can get pure, unadulterated heroin, you have no problems (of the type that gets pinned on the heroin).

So the reason that's given "look at how bad the addicts look" is total hogwash. The law causes those problems, not the heroin. Make heroin illegal, and the only "heroin" you can get has drano in it.

In the US when one could buy heroin more easily than alcohol there was no huge heroin problem. There was no need for a DEA. The problems arose only after the drug became illegal, and the previously normal people were forced out into the open, when a previously harmless legal activity was made illegal.

Pakistan made heroin illegal in 1970. Before 1970 Pakistan had no big problem with heroin. The users were indistinguishable from the regular population. After 1970, Pakistan had all the standard problems. The health of users deteriorated. Crime went up. The black market profits increased. The number of addicts WENT UP.

the drug traffickers that pop up whenever a drug is made illegal have an enormous incentive to MAKE MORE ADDICTS.

Making heroin illegal INCREASES THE NUMBER OF ADDICTS.

And making it illegal eliminates its legitimate use as a pain reliever.

There are good reasons to make it legal.

There is NO good reason for heroin to be illegal.

NONE. WHAT. SO. EVER.

Legalizing heroin fixes many problems:

Afghanistan suddenly has a thriving legal agricultural crop.
Afghan warlords lose their major source of funds.
The US saves bazillions in police and DEA expenses.
Prison costs fall precipitately.
Crime committed by junkies goes to zero.
The positive tax consequences are in the billions.

The downside? No law to prevent addiction. But the law isn't working. Heroin is cheap and available in every corner of America, with no age restrictions. We just need to buy up those old 50's style strip motels that are everywhere, and fit each tiny room with 4 to 8 bunk beds. Junkies get 3 MRE's a day, clean needles and a gram or two of smack a day.

Once a year, elementary school students and high school students would get trooped through the place to see how glamorous all the snot nosed, nodding junkies look, and plan their own future drug use.

[Spartacus]

Re: Fed plotting how to achieve infinite money

But the law isn't working.

it's working to the extent the law makes heroin addicts look so bad - that makes it an easy sell for the politicians to keep heroin illegal. Even though it's not the heroin hurting the addict - it's the law.

Heroin is cheap and available in every corner of America,

not quite. heroin plus drano is available. Heroin plus clorox is available. Heroin plus whatever crap the dealer wants to put into it is available.

Pure, safe heroin is not available.

[Andreuccio]

Re: Fed plotting how to achieve infinite money

Here's one place.

Thanks. Unfortunately, I was signature number 303. I think they're a ways off from achieving critical mass.

[Jeff]

Re: Fed plotting how to achieve infinite money

Thanks for the feedback. I generally feel like I'm shouting in the closet on this topic. How freaking hard is it to think outside the box just a teeny bit?

[c1ue]

Re: Fed plotting how to achieve infinite money

Your sentiments regarding legalization are nice, but it is disingenuous to assume that the long term effects are all positive.

Look at tobacco.

From a medical standpoint, it isn't THAT dangerous, but even this long term danger was concealed by the profit-making tobacco industry for long enough to maximize the impact on the population - a game still ongoing in the rest of the world.

Why is it that legal heroin somehow has no health effects?

My personal take is that the best way to reduce the drug problem is a nice depression.

No money. No drugs.

[Jeff]

Re: Fed plotting how to achieve infinite money

No, the problem is that expensive, illegal heroin requires that junkies rob you and me. Ifwe provide it to them, along with housing at far less than prison costs, we just pray that they OD sooner rather than later. They won't bother robbing us as long as the smack keeps coming.

[c1ue]

Re: Fed plotting how to achieve infinite money

Jeff,

So why don't we provide cheap tobacco and alcohol then?

Then all the drunk drivers can die in car accidents, and the lung cancer patients can hack out their lungs before needing oxygen tents.

How about gambling? Legal gambling in all states - an industry with no (unwilling) victims.

Prostitution and pornography?

I just think there are some vices which should be frowned upon.

[kingcopper]

Re: Fed plotting how to achieve infinite money

I agree on the legalization of any drug that is found to have a safe history. This of course would ban most synthetic substances such as crystal meth or extacy; however many safe alternatives like coke and narcotics already exist!

It would bring taxable income, much lower crime rates, and lower tax rates as a result.

[Nervous Drake]

Re: Fed plotting how to achieve infinite money

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[ax]

Re: Fed plotting how to achieve infinite money

Jeff,

So why don't we provide cheap tobacco and alcohol then?

Then all the drunk drivers can die in car accidents, and the lung cancer patients can hack out their lungs before needing oxygen tents.

How about gambling? Legal gambling in all states - an industry with no (unwilling) victims.

Prostitution and pornography?

I just think there are some vices which should be frowned upon.

c1ue, I don't fault you for frowning upon such vices, but Jeff's argument remains correct. Thinking that junkies won't search for drugs in a depressed economy is not correct however, no more so than thinking people who are being foreclosed on won't steal the plumbing and AC units from their homes before they leave out of desperation. We already do provide cheap alcohol and tobacco, don't we?

[c1ue]

Re: Fed plotting how to achieve infinite money

Junkies exist because there is leisure available to start such vices.

When times get tough, there is less leisure available.

Sure, you can point to an addicted heroin junkie and say that legal heroin could have avoided this person stealing.

You can also point out that heroin junkies have a fairly short lifespan; well before 20 years are up they have self corrected.

Remember crack? That was a big deal 15 years ago.

But Crack evidently kills you quicker than heroin; while crack is still around, the 'crime wave' engendered is since receded. Admittedly, not disappeared, but then again people rob for alcohol these days too.

Then again, as the bible says, there is nothing new under the sun.

In the turn of the century there was also a big drug problem (as well as alcohol problem) in the United States.

It was so bad they passed Prohibition.

Yet somehow this problem receded into the forgotten depths of history.

[Guest]

Re: Fed plotting how to achieve infinite money

My nightmare scenario is a US hyper-inflation and melt-down of the economy. By hyper-inflation, I mean something like 10% or 20% per year inflation.

In this scenario, there would be no safe places to put U.S. dollars.

Gold would be something like $2000 per ounce. Any takers? And how are you going to eat? Saw a piece off of your gold bar? Take your gold to the grocery clerk, and see if they would take it? ( Dream along with me! )

Bonds? The bond market would be all but worthless as interest rates would be in double digits. If you sell into this market, you just got wiped, and if you wait until maturity, you take the worthless pesos.

Even worse, Bernankee still is at the Fed, and he refuses to admit to more than 3% inflation in the economy. And no-one will pay double-digit rates of interest when the money is being adequately supplied thanks to the Fed.

Real estate? See what real estate would be worth if mortgage rates are 20%--- if you could even get a mortgage. The fact that banks are flush with cash doesn't mean that banks would be willing to lend on domestic mortgages. ( Banks have better investments abroad. )

Cash? It's peso time. (It isn't even good for wall-paper because the glue is too expensive.)

Stocks? The U.S. companies would be worthless because their earnings are in pesos. And few companies would be able to increase their earnings at a rate faster than the currency is going down.

Land? Your land is worthless because the taxes just wiped you out. And no-one can afford your land because they can not finance it.

Rental real estate? No-one can afford to pay the rents, and they turn your property into a drug-den if the do pay the rent. Either this, or your renter comes up with the rent by sub-leasing to several of his friends in a motorcycle gang.

Selling your labour? There is no need for your labour. And if there was, your pay-cheque would buy nothing anyway. To compound your problems, your retirement savings now buys a few postage stamps.

Farming? Your water bill, your potash bill, your diesel bill, your electric bill, your gasoline bill, your seed bill, your mortgage bill, your machinery replacement and repair costs just wiped you out.

In the nightmare scenario, everyone starves. The point is: everyone depends upon everyone else, and no-one would be able to escape the depression.

In a complete breakdown of the U.S. economy, the gangs and drug-dealers would control the land.

1. It's laughable and hysterical to refer to 10% inflation as "hyper-inflation". Go read up on Argentina or Weimar Germany. I would be fine with even 20% inflation for a few years if given a guarantee against true hyper-inflation. Not happy times, but I can work with it.

2. Where is this "you can't eat gold" coming from? You simply sell your gold for dollars, walk to the store, buy your food. Gold will go up with inflation and retain your buying power. And in fact, your grocery store may be more likely to take real gold than dollars!

3. TIPS, while imperfect and not keeping up with inflation, would lose less buying power than regular bonds. Not my thang, but a step in the right direction.

4. Inflation is being grossly under-reported. But for how long? Another year or so of prices soaring while they claim 4.5% inflation and you might see that change.

5. RE prices will certainly be affected by interest rates. But when they finally reach supply/demand equilibrium, those with CASH to buy them may do ok. Buy a place and rent it out for income. Rents rise with inflation. Again, it's not great, but it's something tangible and will help preserve wealth, if not grow it.

6. While earnings will not keep up with inflation, they will rise to meet it at a lagging pace. It's not like they'll become worthless. Again, I wouldn't own them myself, but it's not a zeroing out of all stock wealth situation.

7. Land: All RE is local. Taxes are based on valuations. Taxes on raw land are not huge (at least here). You're not entitled to sell a lot anytime you want. But if you buy in the downturn at the right time you could do very well many years from now. It again is tangible and will eventually return a profit. Or are you assuming demand for land ends for all time? Gotta think more long term with land.

8. A little pessimistic, aren't we, on rentals? Again I wouldn't do it, but there will be many new renters in coming years. People need a place to live. The key is what you pay for the property vs the rents. Buy it wrong, you lose.

9. You're really descending into pessimism. Your labor is worthless or valuable based on what it is. If you're a nurse, you're fine. If you're a mortgage specialist, maybe not. Use time to get skills you need now.

10. Your retirement savings will only buy mere stamps if you sit it in the same investments you had it in during the good times. Commodities, gold, etc are ways to cope. You have to stay flexible and on top of things. yes, putting it in 30 year bonds won't work. But there are moves you can make to PROFIT from the collapse. (ask Peter Schiff!)

11. You might want to read up some on how farming is booming and clear that land you can't sell for crops. Go check the chart on DBA for the last year or so. Food is one of those "demand inelastic" things, you know.

I'm a pessimist by nature, but calling for basically the end of the world is overreaching, I think. A substantial fall in standard of living is in order. But so what? Poor people today live more comfortably than the Vanderbilts did just over 100 years ago. Gotta keep it in perspective.

By far the biggest problem will be retaining employment at even a modest wage and staying solvent. So lose the debt and fancy trappings and get lean. You'll be ok.

[Jeff]

Re: Fed plotting how to achieve infinite money

Nobody is saying a heroin habit is a good idea. It's just that the laws don't work. Legalization allows you to tell people who buy it from a government office, "Hey dumbass! You are throwing away many chances for a better life, but we don't feel like jailing you, so have a nice day, you idiot."

Legalization doesn't equal condoning. Just admitting that prohibition doesn't work, and never has. It's just moral masturbation to make bluenoses feel better.

[c1ue]

Re: Fed plotting how to achieve infinite money

Perhaps I'm still too idealist at heart, but I don't agree that a short term failure still means giving up and legalizing.

But then again, why isn't prostitution legalized? I'd think this is a far less dangerous (self and others) type of activity than drugs.

Or fraud? Almost no one dies or is physically hurt by such activity.

Stupid is as stupid does.

I'm not even going into theft, extortion, armed robbery, etc.