Bugs,
Jos. A. is telling you something about deflation:
Thursday, September 24, 2009
Wear an Ounce
Since the Romans plundered their hemisphere and then some, a fine Toga (later: fine business suit), belt, and pair of handmade leather shoes has always very closely equated to the price of an ounce of gold.
Bugs,
Jos. A. is telling you something about deflation:
Bugs,
Jos. A. is telling you something about deflation:
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Hi FDRAOA,
ReplyDeleteFrom a previous comment thread:
"Do you believe that there is anyway that quantitative easing can out pace the deflationary pressure?"
Hi BMF,
No. The fundamental reason is that deflation ravages previous commercial bank 40:1 leverage, and easing no longer carries a lever.
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So, what you mean is that the compounding of the debt already in circulation is even more powerful than the results produced by easing?
If this is the case, what happens if the FED and Govt. purposefully engage in very rapid easing to knowingly destroy the dollar in order to substitute a newer fiat currency type?
Also, what would be the preceding indicators in terms of technicals, indices, and statistics if we were going to drop more.
I have a definite bear case and a definite bull case and it's not often that your convictions are split down the middle.
"So, what you mean is that the compounding of the debt already in circulation is even more powerful than the results produced by easing?"
ReplyDeleteThe leverage, yes. Commercial banks are already run upon and most are bankrupt. The Fed is bankrupt too, but that didn't stop them from starting, so it my not force them to close right away.
But I believe the Fed will be shut down, probably sooner than most think - maybe 2-5 years from now. The Fed sees the writing on the wall, anyone can see the majority of Americans now understand that the Fed is their financial enemy, and so I'm sure Fed swindlers and con artists are already working on creating their own replacement.
"If this is the case, what happens if the FED and Govt. purposefully engage in very rapid easing to knowingly destroy the dollar in order to substitute a newer fiat currency type?"
That's already happened and failed. The problem with printing currency only for profit is that you have no way of increasing the currency supply without a sucker, and suckers have dried up. The Fed is overleveraged and broke, the govt is too. = Deflation.
"Also, what would be the preceding indicators in terms of technicals, indices, and statistics if we were going to drop more.
I have a definite bear case and a definite bull case and it's not often that your convictions are split down the middle."
I think I've posted on that already. If you need a decision, bull vs bear, and a ottally predictable plunge from 14.1K coupled with the fastest asset deflation in US history, as it has already unfolded (but is only, perhaps, 5-10% behind us), you won't have to wait long for fireworks show #2.
If you have 40,000 dollars in you BOA saving account and you owe 50,000 on you home. Would you keep the 40,000 in the back account for a rainy day or would you go ahead and put the 40,000 on your mortgage???
ReplyDeleteFDR,
ReplyDeleteThat is hardly a fine toga.
"That is hardly a fine toga."
ReplyDeleteIt's not a very good business suit, either. :)
"If you have 40,000 dollars in you BOA saving account and you owe 50,000 on you home. Would you keep the 40,000 in the back account for a rainy day or would you go ahead and put the 40,000 on your mortgage???"
ReplyDeleteIt would probably depend on the cash flow the mortgage payoff would free up, every situation is different. One thing I wouldn't count on is easy access to the cash if it is in a broke bank like BAC.
If you are lucky BAC will go bust early to get into some sort of FDIC legal arbitration while congress still has the will to bail; the USA certainly can't bailout BAC's $2T in promised bad debt, or C's $3T, or the other several $T of the next few large banks.
Too big to fail, failing, in the future means serious political unrest and possibly pennies on the dollar. I envision T-bill rates going severely negative when all of those trillions run for a few billion at auction; doors of capital preservation will slam closed.
Like all insurance, the safety of T-Bills will only be only available for purchase until you need it.