I don't think so. If bread costs 8 and a value meals 15 then that will be a direct reflection of runaway inflation. With that all those equity paper assets that are invested in horrifically underperforming projects will all be dropping back down to earth. Mark my words, the top billionaires today will all see their paper wealth eroded greatly over the next 10 years. Tesla is worth a fraction of its current price. So are most other tech stocks. One of the worst things one can do today is to buy properties that are overvalued. Most lemmings who buy in this market are tricked by low mortgage rates but don't realize that they just locked in a low rate to service a completely overvalued asset that will at some point converge with fair value. Same with most stocks today.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
I’m of the belief we’ll never see asset deflation again
- Thread starter SammyJ
- Start date
I don't think so. If bread costs 8 and a value meals 15 then that will be a direct reflection of runaway inflation. With that all those equity paper assets that are invested in horrifically underperforming projects will all be dropping back down to earth. Mark my words, the top billionaires today will all see their paper wealth eroded greatly over the next 10 years. Tesla is worth a fraction of its current price. So are most other tech stocks. One of the worst things one can do today is to buy properties that are overvalued. Most lemmings who buy in this market are tricked by low mortgage rates but don't realize that they just locked in a low rate to service a completely overvalued asset that will at some point converge with fair value. Same with most stocks today.
Too much logic in this post for many ET degenerates to comprehend.
When I subtract the annual deficit from US GDP it is negative every year since 2008. Effectively the economy has been in a constant recession but we've been able to pretend everything is fine by selling the farm and living beyond our means.
The federal reserve and federal government have passed the point of no return. The government is deep in $30 trillion of debt. The federal reserve can't raise rates because it would bankrupt them.
At 5% interest rates it would cost $1.5 trillion to service the national debt which is roughly equal to the total income tax collected.
Also, many states depend on capital gains to keep their budgets afloat. If stocks even stopped going up then California would be in big trouble because so much of their tax revenue is derived from wealthy investor capital gains.
No chance they can ever raise interest rates and let housing prices fall either as 2008 showed how that plays out.
Thus the feds have to keep running the printing press, manipulating interest rates(can't let them rise), pretend there is no inflation, and create asset bubbles. If inflation picks up they will not raise rates. They are not going to raise rates and bankrupt the federal government, states, municipalities, individuals, corporations, etc.
The market hasn't figured this all out because if they did then the US dollar would collapse.
The federal reserve and federal government have passed the point of no return. The government is deep in $30 trillion of debt. The federal reserve can't raise rates because it would bankrupt them.
At 5% interest rates it would cost $1.5 trillion to service the national debt which is roughly equal to the total income tax collected.
Also, many states depend on capital gains to keep their budgets afloat. If stocks even stopped going up then California would be in big trouble because so much of their tax revenue is derived from wealthy investor capital gains.
No chance they can ever raise interest rates and let housing prices fall either as 2008 showed how that plays out.
Thus the feds have to keep running the printing press, manipulating interest rates(can't let them rise), pretend there is no inflation, and create asset bubbles. If inflation picks up they will not raise rates. They are not going to raise rates and bankrupt the federal government, states, municipalities, individuals, corporations, etc.
The market hasn't figured this all out because if they did then the US dollar would collapse.
How do you figure 5.3% would bankrupt the government? All issued debt was sold at fixed coupon rates and hence yield to maturities. They would only be exposed to higher rates for newly issued debt that needs to be priced at market rates to be competitive with a yield of 5.3%. This, I think, is not the real issue. The real issue is central banks that have maneuvered themselves into a dark corner. Should inflation pick up further which it certainly will at some point then central banks are out maneuvered. They can't lower rates by much, and if they went negative (or further negative as the case may be) this would stoke inflation even further. If they raise rates then they will obliterate an awfully inefficient capital market that is invested in underperforming projects. Either way, the bill will need to be paid at some point. The huge mistake was that central banks and government regulators chose not to let rotten banks and corporate entities go bankrupt. Instead they chose to keep rates low for a way too long time. Short term benchmark rates should have been between 2-3% at any time between 2012 and 2019. Nothing was done instead, they all benefitted from paper appreciation in their 2 or 3 estates, stock investments. At no other time in my life have I been more attracted to the 1%er conspiracy theories than in this past decade.
When I subtract the annual deficit from US GDP it is negative every year since 2008. Effectively the economy has been in a constant recession but we've been able to pretend everything is fine by selling the farm and living beyond our means.
The federal reserve and federal government have passed the point of no return. The government is deep in $30 trillion of debt. The federal reserve can't raise rates because it would bankrupt them.
At 5% interest rates it would cost $1.5 trillion to service the national debt which is roughly equal to the total income tax collected.
Also, many states depend on capital gains to keep their budgets afloat. If stocks even stopped going up then California would be in big trouble because so much of their tax revenue is derived from wealthy investor capital gains.
No chance they can ever raise interest rates and let housing prices fall either as 2008 showed how that plays out.
Thus the feds have to keep running the printing press, manipulating interest rates(can't let them rise), pretend there is no inflation, and create asset bubbles. If inflation picks up they will not raise rates. They are not going to raise rates and bankrupt the federal government, states, municipalities, individuals, corporations, etc.
The market hasn't figured this all out because if they did then the US dollar would collapse.
I don't do ETF's for commodities... The main reason is that it's just a straight purchase, and I like to use them as a hedge. So I put up only a small amount of margin to keep the hedge...Treeman, two questions on your post. Any ETFs or funds or stocks that I can get into to get into copper, nickel, tin and aluminum that you would recommend? Also, I've been loading up on metals to the tune of ~$2,000 per day for like a month now, plan on accumulating at that level for well over a year. But I've been buying mostly silver, some gold ETFs. Do you consider those two metals inferior to the ones you listed? Not as good as inflation hedges for some reason?
Thanks Treeman!!!
Nickel, tin and aluminum are hard to come by. I don't trade them at all.... JJT gives you tin. CPER copper. I'd like futures though. It's easy for me to adjust the percentage hedge I have on.
I dumped my silver a bit back. It's just thrashed around.... If it can breakout, I'll play. It's got room to run if it gets there. But it's been dead money- so I'm out. I haven't touched gold. That's really been dead money, which, ironically, needs to make a stand right here. It may rally afterall, but it hasn't shown any sign of that yet.
I'm in Platinum, Copper, Gasoline, and WTIC. I'd love to be be in Brent, but won't chase it, same for heating oil. Natural gas is a losers game. I'm mainly in Platinum for diversification, though it's treated me well... I'm super skeptical of the metals right now, but will ride the winners (which is only platinum). Commodities I'm waiting for a solid pullback on - Lean Hogs, Soybeans, Heating oil, and Brent (aiming for oil to be about 40% of my hedge). All are in backwardation.
How do you figure 5.3% would bankrupt the government? All issued debt was sold at fixed coupon rates and hence yield to maturities. They would only be exposed to higher rates for newly issued debt that needs to be priced at market rates to be competitive with a yield of 5.3%. This, I think, is not the real issue. The real issue is central banks that have maneuvered themselves into a dark corner. Should inflation pick up further which it certainly will at some point then central banks are out maneuvered. They can't lower rates by much, and if they went negative (or further negative as the case may be) this would stoke inflation even further. If they raise rates then they will obliterate an awfully inefficient capital market that is invested in underperforming projects. Either way, the bill will need to be paid at some point. The huge mistake was that central banks and government regulators chose not to let rotten banks and corporate entities go bankrupt. Instead they chose to keep rates low for a way too long time. Short term benchmark rates should have been between 2-3% at any time between 2012 and 2019. Nothing was done instead, they all benefitted from paper appreciation in their 2 or 3 estates, stock investments. At no other time in my life have I been more attracted to the 1%er conspiracy theories than in this past decade.
The fools at the treasury has continued to shorten the average yield of the national debt. This is presumably because they couldn't find enough buyers of 10Y and 30Y paper. Average maturity is only 65 months.
If inflation or interest rates rise then the whole thing blows up rapidly. They'd either have to raise taxes(killing the economy), cut government spending (hurting economy, government employees, retirees, and welfare parasites), or accelerate the deficit (flood the market with even more supply, making the cost of servicing the debt even higher)
As usual, the catalyst will be coming from a very unexpected corner, but yes, in the end, something has gotta give.
The fools at the treasury has continued to shorten the average yield of the national debt. This is presumably because they couldn't find enough buyers of 10Y and 30Y paper. Average maturity is only 65 months.
If inflation or interest rates rise then the whole thing blows up rapidly. They'd either have to raise taxes(killing the economy), cut government spending (hurting economy, government employees, retirees, and welfare parasites), or accelerate the deficit (flood the market with even more supply, making the cost of servicing the debt even higher)
The price of oil went negative not so long ago, after years of these same types of warnings about hyperinflation. I include myself in those who thought we were going to have hyperinflation back in 2009. I've been through enough of these "sure to happen" scenarios to know, if nothing else, they're far from sure to happen.So, normally I'd totally agree with you Sig. But I don't think SammyJ is saying we'll never have down days in the markets and what not. What I think he is saying is that, given that they printed like 23% of all dollars in existence in the world LAST YEAR, there is no end in sight to the printing, and more than likely it will only increase more and more, big inflation numbers, and indeed hyperinflation, can't be too far pff down the road. And I agree with him 100%. Boiled down I think he's saying there were no significant price decreases in the Weimer republic - nothing is going down in price for any significant amount of time when there is a 322 percent monthly inflation. Same here - if the government keeps printing money at a 23% annual rate, market and other prices are only going UP in the long run. And its only going to get worse.
Sure, there will be some blowout event eventually, and some new or reformed government will stop the insane policy, but for the time being all we see coming down the pipe is high inflation and hyper-inflation, and rising prices are going to be with us for the long foreseeable future...
How does Treasury "find buyers"? When you understand the answer to that question, a lot of this will make a lot more sense to you.The fools at the treasury has continued to shorten the average yield of the national debt. This is presumably because they couldn't find enough buyers of 10Y and 30Y paper. Average maturity is only 65 months.
If inflation or interest rates rise then the whole thing blows up rapidly. They'd either have to raise taxes(killing the economy), cut government spending (hurting economy, government employees, retirees, and welfare parasites), or accelerate the deficit (flood the market with even more supply, making the cost of servicing the debt even higher)