But here is why it’s not that funny:
We are headed for DEFLATION and a DEPRESSION…
Read this article or you will be a loser in the end…
I hope I am wrong, J. I really do.
I think there it is very probable we will enter a period of either terrible inflation or deflation, depending on how things play out. I never said we are 100% definitely headed for inflation. I still believe, as I pointed out in that other thread, that it is terribly disingenuous to argue that inflation will not occur simply because our currency will remain stronger than the currency of (pick any other) nation. It is much deeper than that. There is alot of money being printed now. There is also a $500+ trillion derivatives market that is melting down. That’s 10 times the earths GDP. That is alot of equity being wiped out, and how it is sorted out by the central banks of the world will determine whether inflation or deflation occurs.
Like I said, I hope I am wrong. But I’ve been right a whole lot lately.
Sure, but I have made other points in my other arguments that supported my thesis and I didn’t feel like writing them all up again. All I am saying is that it is terribly disingenuous to argue that inflation will occur simply because our government is “printing money”. Injecting money into the system? Yeah, we will see about that. If you wrote $1000 worth of bad checks when your checking account has a $50 balance and you make a quick deposit of $1000 to avoid service charges, that doesn’t exactly set you up for a shopping spree. These injections are to keep banks solvent and promote some type of lending. If the banks go back to subprime lending then yes, inflation is a risk, but if the government let’s that happen it will be a complete and utter failure. I almost guarantee you that as soon as the housing market starts to stabilize, interest rates will start coming up pretty sharply. That, and the fact that we are headed for a recession which puts downward pressure on the consumer price index are two HUGE things that will keep inflation in check. Inflation really isn’t as risky as people think it is. Inflation is only a risk when there is a surplus of money. There will not be a surplus and as soon as this “injection” starts to show signs of a surplus, we will yank it back out of the system. Trust me on this. Bernanke called me on my iPhone and told me.
And where did you get the number 500 trillion from? Scroll down please…
You need to do some reading on OTC derivatives, grasshopper.
$516 trillion according to the bank of international settlements. Roughly 10 times the earths GDP. Notice you don’t hear the talking heads on tv mentioning that, eh?
Even 10% of that is a lot of failed debt to monetize.
Interesting article. I saw a car dealer on the news today complaining that only 3 of 4 people were being approved for cars loans. 75% of the buyers are approved, and he’s complaining!
I remember when it was rare to have unsecured loans (credit cards). People bought stoves, tvs, etc. on time, but they were repossessed if they didn’t pay. Today its all credit cards, and while they may have bought a tv with the card, it’s still unsecured debt.
Eventually, this will have to be addressed in our economy, and this may be the biggest brick to fall. This will effect banks and retailers directly if people start to default on their cards, or if banks withdraw their credit. But I’m not sure which is worse in the short term: people not using their credit cards, or people using them and then defaulting.
The most revealing part of the article was the length of time to recover. It didn’t happen overnight then, and it isn’t gonna correct itself overnight now. Let’s hope we didn’t waste 700B.
It’s very hard to repo a tv or stove nowadays. The repo man has to have permission to come into your house. If you don’t let him in, he can’t repo and that’s a fact!