Spiralling Outta Control... Democrats Seek Millionaire Tax Surcharge

[zboy2854A]

Quote from IanMacQuaide:

zboy, when you say "get rid of it" referring to cash, does that mean buying CD's and Muni Bonds? (ya'll don't have to point out my economic ignorance, I'm well aware of it )

Well, depending on how mild the inflation is, it could be something like that. In a mild or controlled inflationary period that coincides with economic expansion, such as we saw from 1982-2000, you can be in stocks or treasuries. But what I was really referring to was examples of severe inflation or hyperinflation, where people literally attempt to spend the money on pretty much anything tangible they can before it loses even more value.

In examples such as Argentina, Zimbabwe, Weimar Germany, etc., people would literally run to the store as soon as they got cash to spend it and get rid of it, because there was a good chance that cash would be worth even less an hour or two later. Once you enter that type of scenario, cash is a hot potato, and you want to spend it and be in anything but cash as quickly as you get it.

 

[PatrickQ]

Quote from Scataphagos:

--- having the opportunity to buy real, productive assets on the cheap?)

I agree, but so far the opportunity to buy real asset(s) on the cheap are not materializing. govt. / banks holding them up....

 

[Angrycat]

Quote from Scataphagos:

A bit more to the story....

Sure, "deflation punishes investors" as asset prices decline. BUT it rewards savers.. as the buying power of their money increases. (Personally, I think that's a good thing. What would be wrong with assets/prices declining during deflation so that someone who formerly could not afford a house or a car, now could? And as for investors, what's wrong with their having the opportunity to buy real, productive assets on the cheap?)

In the big picture, deflation is the great healer and rejuvinator. Inflation is the boogie man... Destroyer of Worlds!

Governments, of course, never tell this story the way it really is. They HATE deflation, as it's a big obstacle to getting re-elected. But they LOVE inflation.. as it greases the wheels for spending and their political careers..... devastation it brings notwithstanding.

You're conflating a few things.

"Saver" and "investor" are synonymous.

If you're holding cash during periods of deflation, you're better off than if you invest it. So, instead of hoarding commodities (as you would in inflation), you start hoarding cash instead. You don't want to invest it with negative rates of return. You don't want to buy that chair today since it will cost less tomorrow. That worsens the deflation, of course.

If prices decline because productivity improves, then we benefit because we can buy more goods for the same amount of cash without a negative impact on growth. But, if we get deflation because everybody is too scared to invest, then that's bad. The reason behind deflation is what's important.

But, I agree with you in that inflation is MUCH worse than deflation because deflationary pressures ease naturally. As long as there are human beings, they will want and need stuff and as long as there is want and need, there is demand.

Every single depression before the Great Depression (when the government decided to meddle and extended a normal depression into a ten year odessy) saw a pretty rapid rebound. But, inflation has literally destroyed nations - the Soviet Union, Chile, Argentina and Zimbabwe are just a handful of examples.

 

[Angrycat]

Quote from PatrickQ:

I agree, but so far the opportunity to buy real asset(s) on the cheap are not materializing. govt. / banks holding them up....

Yes....by inflating them. Printing currency to provide fake demand.

Ain't government great? Really working for "the people" those sainted souls.

(yes, I'm bitter and angry)

 

[Scataphagos]

Quote from PatrickQ:

I agree, but so far the opportunity to buy real asset(s) on the cheap are not materializing. govt. / banks holding them up....

Correct. They are fighting the deflationary forces tooth-and-nail. The big question.... "Will government prevail, or will deflationary forces play out in spite of government's efforts"?

 

[Scataphagos]

Quote from zboy2854A:

Well, depending on how mild the inflation is, it could be something like that. In a mild or controlled inflationary period that coincides with economic expansion, such as we saw from 1982-2000, you can be in stocks or treasuries. But what I was really referring to was examples of severe inflation or hyperinflation, where people literally attempt to spend the money on pretty much anything tangible they can before it loses even more value.

You have hit upon a point most never get.

Since the creation of the Fed in 1913, we've had constant inflation and currency debasement over about 100 years. The value of the dollar has declined by 92-99%, depending upon whose number is reference.... I think the 99% number is the more accurate.

In other words, the buying power of the $USD has had a "100:1 devaluation". Looking at our general economic health, we'd all likely say "we've dealt with it at least reasonably well".. and that's the case. In spite of the fact that "things" which used to cost $1, now cost $100, we've coped.

And, that's historically normal. That is, an economy and its society can cope with a 100:1 devaluation (at least, the FIRST one) reasonably well if it's slow enough. But what about the NEXT 100:1 devaluation? You know, when things which formerly cost $1, now cost $10,000? Can we cope with THAT? (If in doubt, see Zimbabwe... or Turkey, 1982-2005)

The answer is NO! At some point in the inflationary spiral, things go parabolic and "get out of control". Asset values, income, wages, etc. can no longer "keep up" with the inflation. Likely we are knocking on that very door right now.

 

[Scataphagos]

Quote from Angrycat:

You're conflating a few things.

"Saver" and "investor" are synonymous.

Disagree. Many who are savers would never risk money in the stock, bond, or RE markets... "Insured bank savings only". (My parents, a prime example.) Nothing wrong with savers having the buying power of their money increased, however temporary the condition.

 

[LEAPup]

Quote from Scataphagos:

Disagree. Many who are savers would never risk money in the stock, bond, or RE markets... "Insured bank savings only". (My parents, a prime example.) Nothing wrong with savers having the buying power of their money increased, however temporary the condition.

Correct!

 

[Angrycat]

Quote from Scataphagos:

Disagree. Many who are savers would never risk money in the stock, bond, or RE markets... "Insured bank savings only". (My parents, a prime example.) Nothing wrong with savers having the buying power of their money increased, however temporary the condition.

Ah...but you forget that the bank doesn't just keep those deposits in a vault.

It lends those funds out. In fact, a deposit is like owning a share in the bank. You are in fact investing if you have your money saved in a bank.

BTW, I have no problem with deflation. It's what follows overvaluation and corrects bubbles. The problems start when a Bernanke starts running the printing presses in overdrive to "battle deflation".

the cure is worse than the disease.

 

[Sandybestdog]

Quote from MKTrader:
And using the politics of envy and completely fallacious/dishonest stats is nothing new for the Obamunists. Case in point: saving/creating jobs in congressional districts that don't exist, totally bogus accounting in "revenue neutral" health care projections, etc. But I suppose it's good enough for brainless freeloaders and unionized "public servants" who really think we can create an infinite number of wealth-transfer programs by taxing the "rich"/productive to death.

I’m sorry, amidst your incoherent ramblings, I seem to have missed these stats you are talking. Could you repeat them?