hyperinflation

[gnome]

Quote from detective:

One thing people forget about hyperinflation is that its good for the stock market. The stock market benefits from high levels of inflation, it gets crushed during deflation.

Inflation doesn't hurt the rich, its hurts the poor

I'm afraid you're misinformed on both points...

1. "Stock market benefits from high inflation.." The market "benefits" in nominal terms... but it's only because the currency is being crushed. The OWNERS of stocks get wiped out from the currency.

Classic recent example... Turkey 1982-2005.

The "market" went up more than TWO MILLION percent.. at a 68% average compounded rate of return... but the currency lost so much that EVEN IF YOU WERE IN FOR ALL 2,000,000%, your capital still lost 98% of its buying power. (I'm recalling the numbers from memory.... you can Google to verify)

2. "Inflation doesn't hurt the rich"... The inflation and currency debasement will financially bankrupt nearly EVERYBODY.... rich included. The poor never had anything, and they will still be poor. The rich will have had all of their capital sucked dry and be poor too.

 

[Brandonf]

Quote from detective:

One thing people forget about hyperinflation is that its good for the stock market. The stock market benefits from high levels of inflation, it gets crushed during deflation.

If people think we will go into a high inflation period and think stocks are bad investments, they need their head examined. In inflationary periods, the worst investment are bonds and short-term cash. Real estate, stocks, and commodities are great investments in high inflationary times.

Inflation doesn't hurt the rich, its hurts the poor, those that don't own stocks or real estate.

That's why the Fed suddenly going into money printing mode by lowering 75 bps is short-term bullish for markets. In the long run, who knows, they might actually care about inflation but I know Bernanke is definitely not a hawk and isn't shy about pulling out the liquidity hose even before recessions start.

I think you should reconsider your overall thesis. You are right that those assets are likely to appriciate, but what if (this is a stretch, so bear with me) we turn into Zimbabwe and have to start issueing $10million bills that are in current terms worth $4.00. It's not impossible and it does happen. I dont care how rich you are, if you can not get your assets out of a country going through hyperinflation your going to be much poorer for that.

 

[libertad]

Another way of viewing this is to look at more recent devaluation cases...ie Argentina...

They fell 3:1 in a very short period...and there are other smaller currency plays 2:1 etc...

The US currency is so far a gradual 1.5 :1...and the key point here is that the although Soros has commented at Davos that the US currency will lose its reserve status....my take is not that the EURO takes over...but is to say there really is no longer any currency that deserves a reserve status in that most all currencies are continual fiat debasements controlled mostly by politics.

Think of it this way...who thinks Obama or Clinton ...or any other political leader will not be using their currencies on a local political basis...Obama and Clinton are publicized nonproductive lawyers, not economists...

Economics are unfortunately a small idealogical part of political whims...

It seems as though those with wealth will being making more combo type decisions in that they will be making two decisions...One the asset to be purchased ...and the other one the currency that will purchase it...

Countries will be more like stocks...one gets better value when a particular country and its currency is cyclically down because of its current politico-economic situation... And the players will simply be more worldly, and can be because of the internet...and worldwide stock exchange consolidation...

 

[eusdaiki]

If the Asian banks start dumping dollars into the market it'll bring hyperinflation... Once the Asians start selling, the monetary supply would be out of the FED's hands.

 

[Trendytrader]

Time to dust off the hyperinflation discussion.

My view is that we are at present in a deflationary period primarily driven by asset value decline. In addition any wage bargaining is now out the window as everyone looks to secure their current employment.

However, the global tsunami of central bank liquidity flooding the market has to eventuality either be mopped back up by the central banks or would (in theory) create inflation.

So what say you all. Do we have a risk of hyperinflation next year or the year after?

Coming to a US home next winter.

 

[Fractals 'R Us]

I read up on the Weimar Republic a few days back [were they known for anything else but hyperinflation?]. It looks like if one is trading index futures that the indexes will somewhat ride up with inflation, not as much as the inflation but at least in the same direction, so your income will fall off relative to your spending power but at least you will have a rising income in absolute dollars.

I have neighbors that my wife knew since she was a tyke that are on fixed incomes, i'm starting some high volume veggie production in the back yard, they have houses paid for but will need help with the property taxes and food maybe..

I lived through inflation [not really hyper but bad enough] in the Carter years and saw that the government did nothing for people with paid off houses that could not make the property taxes, many retirees lost their houses in those days while Governor Jerry Brown was chasing Linda Ronstat around the globe...

Gold will hedge you somewhat I guess, if the inflation is world wide there won't be a Forex position that could protect your capital, if it's localized then Forex could be incredible, I don't really know a thing about Forex much though...

 

[achilles28]

I think its safe to say that if private wealth ever came down by 20-30%, in a short period - adjustments included - there'd be civil unrest.

30-40%, all out Riots or Revolt.

Most Americans are lower or lower-middle class.

At that level of wealth erosion, people wouldn't have enough eat, let alone house themselves....

Gold and precious metals hold their own during inflation. Paper "assets", like Gnome said, appreciate. Yet, lag far behind.

Part of that is because hyper-inflation literally destroys the nations per Capita Income which is the basis for consumption.

If everybody is broke ass broke, Companies have no customer base.

Its fun to talk and marvel . But if it ever happened. Mad Max Road Warrior Scenario, as Alex Jones like to say.