It's official : Bernanke has lost his mind

The overriding principle is that if you perceive hyperinflation or even just substantial inflation is the next cycle and that cycle is immenient you borrow all you can and trade the money for hard assets. Clearly some hard assets are better than others -- precious metals probably being the best.

Bankers have a great fear of inflation and the smaller the bank the greater the fear. A small savings and loan with almost every dime lent out at fixed rates against real eastate has little room to adjust. While a large money center bank with only a portion of their assts lent that way has the ability to short the dollar, T-Bonds etc. and adjust in ways to overcome or at least partially overcome the longer dated loans.

Argentinian bankers had relatively small sums tied up in longer term maturities and had a great ability to adjust. Some of them -- Edmond Safra comes to mind -- did quite well during a period of substantial, but not hyper, inflation. Safra took in deposits in the local currency and used the deposits to stay short the that currency while long the dollar and some gold. He took a pounding on the interest rate differential but made that back and tons more on his short position.
 
Quote from makloda:


Creditors always lose in a hyperinflation scenario. Debtors make out like bandits.
More...

Yea, but National Income gets cut in half.

Wages are sticky. Prices aren't.

Hyperinflation benefits debtors, sure.

But it simulatenously depreciates wages, purchasing power, and therefore, national income.

Imagine. The average middle class wage earner can afford 5 plasma tv's, every year.

After hyperinflation, they can only afford 3, per year.

Gross Domestic Product (Output), falls by 40%.

Debts get repaid much easier.....if you've got a job.

Hyperinflation (or, supply shocks), reduce national output = recession.

So everything looks good on paper (stocks, real estate, hard assets all do great). But in real terms (output), the economy gets flushed.

Incidentally, Germany, Argentina, Mexico - no nation has ever prospered from a rapid currency devaluation, to my knowledge.
 
Quote from ByLoSellHi:

Volcker has been ousted, unfortunately, and now the insane and corrupt are the gatekeepers.

Bernanke is destroying the dollar and middle class.
More...


hasn't this already been done?

its just that most people do not want to accept that they have no present, let alone futures....


its safer in the cities than in the countryside and in the rurals, if you're watching the news, what with schools being taken over by distraught parents, more heinous crimes in the rurals than in the cities,

peoples losing their minds....

wow, who would have ever thought we as Americans were so materialistic.....


oh, but on economic reports, we often hear the words quoted: "consumer lead revival"...


hmmmm, the two are linked....
 
Totally accurate. Individuals may be fortunate but societies get torn apart. No one in their right mind should cheer the current insanity.


Quote from achilles28:



Incidentally, Germany, Argentina, Mexico - no nation has ever prospered from a rapid currency devaluation, to my knowledge.

More...
 
I see your point and agree with much of it but you are failing to consider the possibility that you will not be able to sell your house because of highly inflated prices and because you will probably fall behind on your monthly payments because the cost of living has gone through the roof. If your house has gone up 3x then so has everything else with it, except your salary, which has probably gone up 2x. Inflation always kills the middle class even if it's mild inflation. It's more likley that your house will get repossed than it is that you sell it for its over-valued price.

Quote from makloda:

You have jackshit upfront. In our example hyperinflation kicks in AFTER you give me the $1,000,000 and I got the house.

You're running in circles with taxes and ammorization schedules, all this changes nothing in the example.

I got free money by ripping off the creditor (you). You gave away $1,000,000 in good money and after say 10 years you get back your original $1,000,000 plus e.g. 8% in fixed annual mortgage interest whereas the actual real value of the money you are paid back is a fraction of the original value assuming 50,000% annual hyperinflation over 10 years.
More...
 
Yes! Assuming he sells the house and takes the profit where is he going to live? In this situation he will be taking a step back in life. That's not necessarily a bad thing if he is retiring or is he wants a smaller house but if he's middle aged or has kids it's not an ideal situation.

Quote from Smart Money:

Concur! And even if he sells the $3 million house, pays taxes on the profits, and pays off the note, he's still holding cash worth about what half a house costs. I'll take that for free. Might be nice seed money to move to Australia. When is it not a good idea to borrow money at 8% and earn 25% or 30% on it? It's freakin' awesome. Further...suppose one were to buy multiple houses and rent them out. Sweet! Tons of free cash...two half houses is one full house.

SM
More...
 
Exactly! All of this spells bankruptcy.

Quote from fail You re:

While that's true consider the following:
1. The hyperinflation is still on so the money you pocket will quickly loose its purchasing power. So you will not really want to sell it. Why would you trade ahard asset for a bag of worthless paper?
2. To actually sell the house you'll need to find someone with $3 mil cash. Anyone who doesn't have the full amount will have to borrow the shortfall at the inflation rate plus sum spread so that he bank can make money. How money cash offers will you get today if you are to put the house on the market?
3. Note that the cost of utility bills, insurance, food, fuel and etc. will be increasing at the inflation rate (by the definition of inflation) while the increases in peoples incomes will always be lagging. The higher the inflation rate the larger the lag. So very quickly the majority of the population will barely have enough money to fill up their cars and buy basic foods. There will also be a few who won't have even that and many of those who are likely to get there first own at least one gun. What do you think a bunch of hungry desperate dumb people with guns are likely to do when they overhear you just sold a house and have $2 mil in your pockets?
More...
 
Quote from Bob111:

don't waste your time,trying to explain the obvious to a people,who have no idea what they are talking about..i was in USSR during the hyperinflation times and you right about how it's works. and this is why i did not expect any inflation any time soon. the banks,the creditors will be totally f*d. much more than they are right now. it will be similar to Japan situation
More...

for those who expecting hyperinflation-

US risks following Japan's example of stagnancy

http://news.yahoo.com/s/ap/20091112/ap_on_bi_ge/us_lost_decade
 
Quote from Bob111:

for those who expecting hyperinflation-

US risks following Japan's example of stagnancy

http://news.yahoo.com/s/ap/20091112/ap_on_bi_ge/us_lost_decade
More...

Oy, bob, you really are Russian. You still write in a Russian accent (your articles are all messed up:). Not meant to be an insult, btw. Just saying I recognize a fellow refugee from the rodina and all.

Bernanke is desperately trying to create inflation to inflate away government debt. As long as people don't buy the hopium and changium he's selling, the money printing will not result in more spending and investing - at least not here. Thus, I can't see how we're going to get any inflation, let alone hyper-inflation. Although, it seems likely that Bernanke's non-stop printing is already causing some inflation in Asia.

As long as the U.S. population doesn't huff the Fed's stuff, we're much more likely to end up like Japan. Which, I guess is better for savers.
 
You must log in or register to reply here.
Back
Top