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Sapiens
11-29-08, 07:00 PM
Get ready for a bank holiday and restructuring of debt. I am not happy about what is coming down the pipe, but the sheep need to be fed and it is only fair they are fleeced.

FRED
11-29-08, 11:02 PM
Get ready for a bank holiday and restructuring of debt. I am not happy about what is coming down the pipe, but the sheep need to be fed and it is only fair they are fleeced.

Inflation 2009: 10%
Inflation 2010: 20%
Inflation 2011: 40%
Inflation 2012: 20%
Inflation 2013: 10%
Inflation 2014: 3%

How's that 6.3% fixed rate 30 year mortgage refinanced in 2008 treating you now?

Google: debtor nations dream of deflation
Google: 100% inflation scenario

We're getting closer.

Down Under
11-29-08, 11:08 PM
Get ready for a bank holiday and restructuring of debt.

Bank holiday, eh? Is this just for the US or more widespread?

Sapiens
11-30-08, 02:16 AM
Inflation 2009: 10%
Inflation 2010: 20%
Inflation 2011: 40%
Inflation 2012: 20%
Inflation 2013: 10%
Inflation 2014: 3%

How's that 6.3% fixed rate 30 year mortgage refinanced in 2008 treating you now?

Google: debtor nations dream of deflation
Google: 100% inflation scenario

We're getting closer.

WWIII


.......

a warren
11-30-08, 03:25 AM
This is why I cannot understand the itulip recommendation to reduce debt to nil & buy treasuries.
Inflation is a wonderful thing if you have debt, and can service it. Look at the boomers who paid off their houses in the seventies largely as a result of having their debt inflated away.



Inflation 2009: 10%
Inflation 2010: 20%
Inflation 2011: 40%
Inflation 2012: 20%
Inflation 2013: 10%
Inflation 2014: 3%

How's that 6.3% fixed rate 30 year mortgage refinanced in 2008 treating you now?

Google: debtor nations dream of deflation
Google: 100% inflation scenario

We're getting closer.

c1ue
11-30-08, 11:59 AM
Warren,

The iTulip view on short term Treasuries is not the same as a generic 'buy Treasuries' statement.

Dr. Michael Hudson also shares this philosophy.

Why? Because short term Treasuries give you the highest level of counterparty confidence (i.e. US government not going to default). Default risk is the highest risk factor right now.

Secondly short term (i.e. 6 months, 3 months) is good because you won't get hurt that bad as inflation ramps up, and will be able to roll over into higher interest rate Treasuries. You'll get hurt, but everything is relative.

If you are able to get through this coming s**tstorm only losing 20% while everyone else loses 50%, you've just gained quite a lot.

Similarly cash is also safe from counterparty risk, and cash will also give you the instant ammo should amazing opportunities pop up - say your neighbor's house is selling for 20% of 2005 price as they need the cash for an operation.

Not very nice, but there it is.

steveaustin2006
11-30-08, 12:13 PM
Warren,

The iTulip view on short term Treasuries is not the same as a generic 'buy Treasuries' statement.

Dr. Michael Hudson also shares this philosophy.

Why? Because short term Treasuries give you the highest level of counterparty confidence (i.e. US government not going to default). Default risk is the highest risk factor right now.

Secondly short term (i.e. 6 months, 3 months) is good because you won't get hurt that bad as inflation ramps up, and will be able to roll over into higher interest rate Treasuries. You'll get hurt, but everything is relative.

If you are able to get through this coming s**tstorm only losing 20% while everyone else loses 50%, you've just gained quite a lot.

Similarly cash is also safe from counterparty risk, and cash will also give you the instant ammo should amazing opportunities pop up - say your neighbor's house is selling for 20% of 2005 price as they need the cash for an operation.

Not very nice, but there it is.

Surely there are some assets that would climb in such a scenario. Major golds and commodity currencies and Canadian bonds would not only seem to be a good bet for less depreciation, but should benefit from investor money piling in.

To me the iTulip stance is conservative and understandably so for protection of wealth, however for those that are trying to take advantage of inflation throughout our lifetime - be it, in bonds, stocks, housing (all previous) etc... the natural course to outpace inflation during such an era does seem to be commodities/commodity equities once the deleveraging is over.

metalman
11-30-08, 12:30 PM
Surely there are some assets that would climb in such a scenario. Major golds and commodity currencies and Canadian bonds would not only seem to be a good bet for less depreciation, but should benefit from investor money piling in.

To me the iTulip stance is conservative and understandably so for protection of wealth, however for those that are trying to take advantage of inflation throughout our lifetime - be it, in bonds, stocks, housing (all previous) etc... the natural course to outpace inflation during such an era does seem to be commodities/commodity equities once the deleveraging is over.

you are assuming the system can be gamed by non-insiders. ej and hudson don't think so. ej even says gold may not help you if the gov't decides to increase cap gains tax from 38% to 90%, for example. heck, they can put a 90% sales tax on it. hudson is more in the 'you can't win' camp than ej is, but hudson is a historian and has been inside these events in russia and latvia and other places... so maybe he's better informed.

raja
11-30-08, 12:39 PM
Inflation 2009: 10%
Inflation 2010: 20%
Inflation 2011: 40%
Inflation 2012: 20%
Inflation 2013: 10%
Inflation 2014: 3%

How's that 6.3% fixed rate 30 year mortgage refinanced in 2008 treating you now?

If you had $100 today, at the end of 2013 you'd have about $31. That's a 70% drop.

If a real estate property fell 20% more over that time, and it was purchased on a 30-year fixed rate, it might be one good way to preserve wealth . . . as c1ue points out, he who loses least may be the winner.

Treasuries will do you no good in a hyperinflation . . . and gold could be subject to profit-killing legislation.

vinoveri
11-30-08, 12:58 PM
Inflation 2009: 10%
Inflation 2010: 20%
Inflation 2011: 40%
Inflation 2012: 20%
Inflation 2013: 10%
Inflation 2014: 3%

How's that 6.3% fixed rate 30 year mortgage refinanced in 2008 treating you now?

Google: debtor nations dream of deflation
Google: 100% inflation scenario

We're getting closer.

Nice and tidy forecast. I know the following has been belabored here, but I still can't remember/fathom what the most likely scenarios for generating the wage inflation that must occur if debts are to be paid off - or at least rolled over. Is it a simple as everyone gets COLAs based on the now "honest" gov reporting of inflation? Seems to me this type of inflation may be bad for equities (in real terms).

steveaustin2006
11-30-08, 01:19 PM
you are assuming the system can be gamed by non-insiders. ej and hudson don't think so. ej even says gold may not help you if the gov't decides to increase cap gains tax from 38% to 90%, for example. heck, they can put a 90% sales tax on it. hudson is more in the 'you can't win' camp than ej is, but hudson is a historian and has been inside these events in russia and latvia and other places... so maybe he's better informed.

The reflation/dollar devaluation trade is one that I've been involved in for 3.5 yrs personally. It was not a difficult call to make 300% (4x) in these small caps in the commodities equity sector during that period. Keeping it was the tough part.

I find it unlikely that capital gains on all commodity equities would be instituted across the board in energy, metals and ags during the inflation .... and very unlikely that gold would be taxed at 90% - almost impossible given the dollar's reserve status. i.e. it doesn't make sense under reserve status circumstances to allow foreigners to protect themselves and punish US citizens.

Even if you take the most insider/cynical view of "insiders/outsiders" then one would have to agree that insiders would reserve a place to make money on this and finding that sector and the right equities is the challenge. It seems a safe bet to me that Paulson's friends are now buying up all commodity related assets on the cheap.

I'm a historian myself (and engineer). When I looked at Weimar in detail (not that we are going to have hyperinflation), I saw that it wasn't reparation payments that kept the inflation going (though that did start it) - it was clearly the industrialists in bed with the politicians who kept lending money to industrialists to buy up all the hard assets and then repaid the deflated loans with devalued money. In the process, many politicians and industrialists became rich.

Residing in the US you could buy foreign commodity companies trading on exchanges here. To me the US seems more likely to allow its citizens to take advantage of the situation rather than punish them while the rest of the world is able to protect themselves. If the dollar keeps its place as the reserve currency, there is little point in preventing citizens from protecting themselves. As EJ/FRED say, hyperinflation is almost impossible here because China/Japan simply cannot sell all their dollars no matter how bad their economies get. It seems more likely under these circumstances that the US gov't would encourage citizens to protect themselves. This is not a closed system; this is a system whose dollars are spread throughout the world - so many that they cannot possibly all come home without hurting holders. In that event, the US does not need to institute capital controls - though even if they do as I say, I find it unlikely they would institute controls on commodity equities when the rest of the world can protect itself.

In the same way that you found EJ/FRED, are you not now looking at the other smart guys out there who are also historians/successful investors who have called markets correctly for decades? I am, and what they are buying indicates an opportunity.

I find the iTulip fatalistic attitude somewhat perplexing. At the very least a US citizen could get a job in Canada and move there protecting themselves from inflation - of course, you have to believe as I do that on a relative basis some currencies will depreciate less than the dollar and some assets will balloon while currencies and debt devalue and that gov'ts universally will not fully prevent people from protecting themselves. History tells me that during inflations the elite always found a way to protect themselves. Why would 'insiders' commit financial suicide?

The iTulip stance does seem conservative to me - how else to describe a group that missed out on the gigantic run up in commodities over the past 7 years? Small cap miners going up 3-10 fold, ags going up 6 fold within 18 months, energy majors? Course they all crashed as iTulip predicted and perhaps the timing was too tough to call though iTuilip did seem to do a good job of it, in retrospect.

Protection of wealth, understandably was the directive. What of those that do not have gobs of wealth to protect but instead are seeking it? They have to be more aggressive and there are a handful of smart guys out there to look to who have a track record of prospering and understand the inflation to come. (Coxe, Faber, etc...)

Some inflation related books to read:
The Great Wave: Price Revolutions & the Rhythm of History (http://www.amazon.com/Great-Wave-Revolutions-Rhythm-History/dp/019512121X/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1228068255&sr=8-1) (written in '95, 1200 years of pricing history and where are are currently in the big picture)

The Penniless Billionaires (http://www.amazon.com/Penniless-Billionaires-Max-Shapiro/dp/0812909232/ref=sr_1_1?ie=UTF8&s=books&qid=1228068330&sr=1-1) ('80, describes 4 great inflations in history)

jtabeb
11-30-08, 10:59 PM
The reflation/dollar devaluation trade is one that I've been involved in for 3.5 yrs personally. It was not a difficult call to make 300% (4x) in these small caps in the commodities equity sector during that period. Keeping it was the tough part.

I find it unlikely that capital gains on all commodity equities would be instituted across the board in energy, metals and ags during the inflation .... and very unlikely that gold would be taxed at 90% - almost impossible given the dollar's reserve status. i.e. it doesn't make sense under reserve status circumstances to allow foreigners to protect themselves and punish US citizens.

Even if you take the most insider/cynical view of "insiders/outsiders" then one would have to agree that insiders would reserve a place to make money on this and finding that sector and the right equities is the challenge. It seems a safe bet to me that Paulson's friends are now buying up all commodity related assets on the cheap.

I'm a historian myself (and engineer). When I looked at Weimar in detail (not that we are going to have hyperinflation), I saw that it wasn't reparation payments that kept the inflation going (though that did start it) - it was clearly the industrialists in bed with the politicians who kept lending money to industrialists to buy up all the hard assets and then repaid the deflated loans with devalued money. In the process, many politicians and industrialists became rich.

Residing in the US you could buy foreign commodity companies trading on exchanges here. To me the US seems more likely to allow its citizens to take advantage of the situation rather than punish them while the rest of the world is able to protect themselves. If the dollar keeps its place as the reserve currency, there is little point in preventing citizens from protecting themselves. As EJ/FRED say, hyperinflation is almost impossible here because China/Japan simply cannot sell all their dollars no matter how bad their economies get. It seems more likely under these circumstances that the US gov't would encourage citizens to protect themselves. This is not a closed system; this is a system whose dollars are spread throughout the world - so many that they cannot possibly all come home without hurting holders. In that event, the US does not need to institute capital controls - though even if they do as I say, I find it unlikely they would institute controls on commodity equities when the rest of the world can protect itself.

In the same way that you found EJ/FRED, are you not now looking at the other smart guys out there who are also historians/successful investors who have called markets correctly for decades? I am, and what they are buying indicates an opportunity.

I find the iTulip fatalistic attitude somewhat perplexing. At the very least a US citizen could get a job in Canada and move there protecting themselves from inflation - of course, you have to believe as I do that on a relative basis some currencies will depreciate less than the dollar and some assets will balloon while currencies and debt devalue and that gov'ts universally will not fully prevent people from protecting themselves. History tells me that during inflations the elite always found a way to protect themselves. Why would 'insiders' commit financial suicide?

The iTulip stance does seem conservative to me - how else to describe a group that missed out on the gigantic run up in commodities over the past 7 years? Small cap miners going up 3-10 fold, ags going up 6 fold within 18 months, energy majors? Course they all crashed as iTulip predicted and perhaps the timing was too tough to call though iTuilip did seem to do a good job of it, in retrospect.

Protection of wealth, understandably was the directive. What of those that do not have gobs of wealth to protect but instead are seeking it? They have to be more aggressive and there are a handful of smart guys out there to look to who have a track record of prospering and understand the inflation to come. (Coxe, Faber, etc...)

Some inflation related books to read:
The Great Wave: Price Revolutions & the Rhythm of History (http://www.amazon.com/Great-Wave-Revolutions-Rhythm-History/dp/019512121X/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1228068255&sr=8-1) (written in '95, 1200 years of pricing history and where are are currently in the big picture)

The Penniless Billionaires (http://www.amazon.com/Penniless-Billionaires-Max-Shapiro/dp/0812909232/ref=sr_1_1?ie=UTF8&s=books&qid=1228068330&sr=1-1) ('80, describes 4 great inflations in history)


Going long gold stocks and then transferring the gains into physical was a very VERY good play for me. (it's fun to have more wealth to protect)
I'm just glad I got it mostly right.

(Spoken as a fellow wealth seeker):)

c1ue
12-01-08, 11:55 AM
Six Mill,

I think the gap between what you're thinking and what Dr. Michael Hudson, EJ, and others (including myself) are thinking is that the government is not out to help you.

The ethic is not one of a benign authority choosing to reward or punish various behaviors.

The ethic is one where the citizenry is a resource to be used.

If the government were truly altruist/benign, we would not be seeing massive gyrations in the US$ causing havoc in the internal and external business markets.

If the government were choosing to punish or reward - there would not be rewards for failure and criminal activity (bankers), nor punishment for savings (inflation).

If, on the other hand, the government is just trying to make a personal buck for its controllers...er leaders... and survive, much becomes clearer.

Dr. Michael Hudson sums it up the best when asked about how to fix the current problem:

His solution is to basically for the US to repudiate all debt. This plunges the nation into a depression as the trade deficit becomes a surplus via the expedient of the US consuming $900B/year less.

The resulting mass unemployment is then channeled and used to cheaply rebuild American infrastructure and world competitiveness.

I don't know if this is specifically what will happen, but is an indicator of attitude.

algerwetmore
12-01-08, 12:28 PM
I have still not heard why savers (debt-free) will not be punished by hyperinflation. I am debt-free, but it seems to me, I should be hoping for deflation, just as the central bankers want inflation.
Can someone explain why any creditor nation would want inflation?

c1ue
01-21-09, 07:11 AM
So it looks like the Debt Jubilee will be Obama's 'Bad Bank' to save all the 'good' banks?