The comparison is based on demographics, not monetary policy. In fact, the deflation could be much worse than in Japan. Credit will never be given as freely as it has before meaning that asset classes will not reach their previous highs for many years to come. And who is going to buy stocks in the next 10-20 years? Today's 20s/30s are paying off debt and health care costs. Plus, who is going to fill the boomer demographic? Nobody. Very soon you'll be wining that there isn't enough inflation.
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Jim Rogers: The Federal Reserve will FAIL!!!
- Thread starter W4rl0ck
- Start date
The comparison is based on demographics, not monetary policy. In fact, the deflation could be much worse than in Japan. Credit will never be given as freely as it has before meaning that asset classes will not reach their previous highs for many years to come. And who is going to buy stocks in the next 10-20 years? Today's 20s/30s are paying off debt and health care costs. Plus, who is going to fill the boomer demographic? Nobody. Very soon you'll be wining that there isn't enough inflation.
Quote from piezoe:
I think Rogers is talking about what is bound to happen eventually, not tomorrow, not next year, but eventually. I agree. The basic Commodities have always been a refuge in times of inflation. And if we don't see out-sized ininflation eventually, it will be the first time in modern history that wild borrowing to cover unbelievable deficits without a large increase in productivity has not led to hyperinflation. At this point i don't see any spectacular increase in productivity in the US economy coming down the pike.
Not true. He called the strengthening of the USD a sucker rally. I can't see how the USD going back to early 2000s levels against the AUD and GBP can be considered a sucker rally. Perhaps the only sucker is Rogers himself.
He has often made claims that were totally false.
Actually, piezoe might be correct. Argentina did this many times and possibly trying a repeat these days as well. It's called liquefaction of debts (through inflation) and in Argentina's case it worked well for corporation and gov. debts which were pulverized (J. Martinez de Hoz and Cavallo's time). Not so good for the general population who is subject to a tax (inflation). Governments know all about this. Whether the US will succeed is another story. But we should know shortly.Quote from short&naked:
The comparison is based on demographics, not monetary policy. In fact, the deflation could be much worse than in Japan. Credit will never be given as freely as it has before meaning that asset classes will not reach their previous highs for many years to come. And who is going to buy stocks in the next 10-20 years? Today's 20s/30s are paying off debt and health care costs. Plus, who is going to fill the boomer demographic? Nobody. Very soon you'll be wining that there isn't enough inflation.
In the case of Argentina's present attempt they went as far as faking official inflation figures while inflating the currency. Why? So as not to pay the indexation by inflation to bondholders. This way, they can freely inflate without having to worry about the extra money that needs to be paid.
Quote from flyingiguana:
the next great bubble: commodities? if inflation becomes an issue imo, government bond shorts are the place to be and not commodities. 10 year TIPS are dirt cheap. gold could see a move in 2009 much like oil had this year.
What are the alternatives, ruling default out a priori: 1. Massive cuts in spending; 2. Large increases in direct taxation; 3. Subtantially increased productivity; 4. Large increases in indirect taxation, i.e., inflation. Only choices 3 and 4 are politically acceptable. But 4 is much easier to pull off than 3. Consequently it is virtually certain the debt will be monetized to a substantial degree.
I agree. Short bonds. But i would think there is plenty of time to do it. We are still going into recession and it's likely the market will move substantially lower yet. We have a long deep recession to get through first. I have not liked TIPS since the government started cheating on inflation numbers. I do like commodities at present prices, but again it would seem there is plenty of time to pick them up at perhaps even lower prices. I have sold a few puts as far out as i can go, hoping to do just that.
Quote from Random.Capital:
That isn't even theoretically possible.
Back to your original claim - Japan has been and continues to be proof positive that your statement is incorrect. If you would like to reword your statement, you are of course free to do so.
If you will go back rros's post above you will see a nice example of monetization ("liquifaction"). The US has in reality been monetizing its debt for a long time now. And this of course is a driver of inflation. You tax the unsuspecting population indirectly so there are fewer complaints, while at the same time cheating your creditors. In my mind, the question is not whether we will monetize, because we already are, but rather: will we get away with it? That remains to be seen, but i think we will for at least the near term. If i'm right, you can expect some quite nasty inflation headed our way.
Only one of us can be right, and the one who gets it right, and reacts accordingly, is going to do better financially than the one who is wrong. In a highly inflationary environment you don't want to sit on cash, you want to hold assets that will inflate, and you want to drag out, if possible, the payment of debt. In a deflationary environment, you want to do the opposite. Inflation encourages borrowing, deflation discourages it.
The Federal Reserve is walking a tightrope. They will try and keep inflation under wraps while not letting deflation get a foothold. They likely will succeed at the latter, but fail miserably at the former, because the guys in Washington have been most uncooperative, especially the past eight years. Let's see what the next eight bring.
Quote from short&naked:
The comparison is based on demographics, not monetary policy. In fact, the deflation could be much worse than in Japan. Credit will never be given as freely as it has before meaning that asset classes will not reach their previous highs for many years to come. And who is going to buy stocks in the next 10-20 years? Today's 20s/30s are paying off debt and health care costs. Plus, who is going to fill the boomer demographic? Nobody. Very soon you'll be wining that there isn't enough inflation.
Those are excellent points, and certainly should be considered. Perhaps the demographic change in the US white population will be partially offset by demographic change in black and Hispanic populations. Also, I am assuming that the mindset of the American consumer will change only very slowly, and that we will not overnight become a nation of savers, squirreling last years tinsel and bits of crumpled wrapping paper away in a drawer.
The mindset of the consumer has already been made up for them.
No more credit card discretionary spending.
No more credit card discretionary spending.
Now, that would be a very good argument, in a FREE market ! But remember, this is exactly what Obama has said he doesn't want, he says capitalism has shown NOT to work and he wants stimilus packages and low interest, to increase lending and spending, because he thinks that's what we need to get out of this recession.Quote from short&naked:
The comparison is based on demographics, not monetary policy. In fact, the deflation could be much worse than in Japan. Credit will never be given as freely as it has before meaning that asset classes will not reach their previous highs for many years to come.
If they would just let capitalism/the free market, run its course, then I indeed wouldnt agree so much with Jim.