Deflation? Inflation? You be the judge!

Quote from darkhorse:

Correction, it wasn't Locke, but Alexander Tyler:

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the Public Treasury. From that moment on, the majority always votes for the candidate promising the most benefits from the Public Treasury with the result that a democracy always collapses over loose fiscal policy always followed by dictatorship."


If the biggest debtors are generally the most irresponsible over the long run, and the majority of the public are irresponsible over the long run, then you have a recipe for debtor friendly inflation being the ultimate end to any and all democratic entities unrestrained by virtue and self discipline. The temptation to steal- and that's what it is, really, from future generations if not the current one- becomes too great.

Funny how morality always comes back to the fore on questions of long term importance.
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Nicely said...And you brought up an often overlooked phenomenon of a sort of "sector" inflation vs deflation scenario, which is one that few people have mentioned (or at least I have not read about anywhere else)...And thats just what the talking heads want...They want to focus on only the aspects of the economy that are deflating and will never, ever talk about the enormous inflationary pressures in healtcare costs, housing costs, and the other necessities of life...Like you said, televisions, computers, vacuum cleaners, etc will deflate along with automobiles, perhaps...but the things everyone absolutely needs are soaring at a rate that is unprecedented...When, if ever, do we hear about how ridiculous insurance costs have become since insurance companies can no longer earn a rate of return high enough to payoff their claims...

Also, very interesting speculation on the masses revolting if/when they are upside down in their mortgages...And then they will find the political party to do the work for them...I think that you have outlined the most probable future course of events in this country in the next 5-10 years
 
Quote from Minime:

We've had a negative trade balance for a long time, and it's eroding our net worth. Until we can become competitive as a country, and stop losing money each year, we can only turn to debt to solve our problems. This doesn't have a long-term good outcome. The question is how long the world will put up with our scheme.
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Actually we produce a product that the whole world wants - its called the US dollar. Because all of the other countries have an interest in propping up the dollar so that their exports are competitive - the US can basically print dollars at will.

Its not a bad deal. We give them pieces of paper and they give us cars, machinery etc.

Because of this lopsided demand for the dollar, I think equilibrium for the US is not a balanced budget, but a large deficit.
 
Quote from Tea:



Actually we produce a product that the whole world wants - its called the US dollar. Because all of the other countries have an interest in propping up the dollar so that their exports are competitive - the US can basically print dollars at will.

Its not a bad deal. We give them pieces of paper and they give us cars, machinery etc.

Because of this lopsided demand for the dollar, I think equilibrium for the US is not a balanced budget, but a large deficit.
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Yes, the US Dollar is an anomaly in the world of Fiat money. Looks like our charm is wearing off though.
 
Quote from vulture:

Nicely said...
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agreed - excellent posts.

from a longterm macro-level investment perspective, besides gold.... anyone care to share their thoughts?
 
Quote from chasinfla:

gold is telling the story.
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Take out terrorism and the impending conflict in Iraq, and anticipatory oil prices, and gold takes a big dumpy.

The price of gold is not about inflation in the way it was about inflation in the late 70's and 80's.

The dollar could slide another 20%, and gold could hit $400.00, however that really isn't too much to get excited about.....

and unlike the 70's and 80's we have potential worldwide deflationary pressures as well.
 
:)

http://209.41.12.102/cgi-local/shoptmc.pl/SID=031874365/page=0401tice.html

"The consumer and the whole economy are living beyond their means and need to retrench. Retrenchment means economic recessions, though, because you have to increase the savings rate and spend less. However, our economy is built on always spending more. Therefore, the cure changes the whole dynamic of the economy and they don’t want to do that. So I think that eventually their only solution is dropping money from helicopters... "
 
Quote from OPTIONAL777:





The dollar could slide another 20%, and gold could hit $400.00, however that really isn't too much to get excited about.....
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yeah, good point. the dollar is telling the story, too.
 
Thanks for bringing this thread back to life Babak.
It's too interesting a topic to face such an early demise.

http://www.nationalpost.com/search/...EC-AFED66FB02C7
This ( Babak's Link ) article : by Richard Salsman ( president of Intermarket Forecasting Inc., Boston.),
Brings to mind the quote:
"Methinks there are more things under Heaven and Earth Horatio,
than are contained in your Philosophy".

"TIME" is a difficult animal to understand - Greenspan is talking about a longer time frame perhaps.

I think that one might discount the Fed's opinion - to their own peril.
( Not that I am a great "Fed Fan" - Quite the contrary ).

I think we are within a stone's throw of the Dollar hitting bottom.
Did that not sorta' look like an exhaustion gap the other day ?
Not saying I'm right - but that's my position .

Greenspan's comments on a "Softening Housing Mkt" , I believe were right on target.
That could add to the deflation equation over the course of this next Decade - No ?

I look forward to reading more great comments from ET'ers on this issue.




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