Deflation coming before hyperinflation? (loans, credit, buy, sell)
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So if this bail out somehow doesn't manage to pass, will we see major deflation and numerous financial failures, forcing the liquidation of tons of assets before the government starts printing up money like crazy to combat it? If that's the case, I might start hoarding cash to pick up assets dirt cheap before the government gets the presses going. What do you guys think about this scenario?
The bill is no more inflationary then the actions taken during the Depression. It didn't cause inflation then and its unlikely to cause it now.
Its odd that we have depression like events yet people are still focused on inflation.
Anyhow, a lot of the speculative "hyper-inflation" arguments were based on an inaccurate ideas about decoupling. But as is becoming clear, Europe is going to do just as bad as the US in all of this. China is slowing etc. This is a global event. There really is no safe heaven....
The bill is no more inflationary then the actions taken during the Depression. It didn't cause inflation then and its unlikely to cause it now.
Its odd that we have depression like events yet people are still focused on inflation.
Anyhow, a lot of the speculative "hyper-inflation" arguments were based on an inaccurate ideas about decoupling. But as is becoming clear, Europe is going to do just as bad as the US in all of this. China is slowing etc. This is a global event. There really is no safe heaven....
I am really scared now. Heaven is supposed to be safe.
So if this bail out somehow doesn't manage to pass, will we see major deflation and numerous financial failures, forcing the liquidation of tons of assets before the government starts printing up money like crazy to combat it?
No, what you'd see is severely limited credit.
If fact, you are seeing it and some examples are:
1) Heartland, a bio-fuel producer, was forced to scrap 7 ethanol plants on the table, because they couldn't get any banks to finance the construction.
2) 11 of the 71 ethanol plants under construction had pulled the plug on the projects because credit dried up and they can't get financing to complete the projects
3) CitiGroup down-graded the ratings for 123 ethanol plants currently in operation that are near failure because they cannot arrange credit to buy corn to produce ethanol.
(If they cannot get credit to buy corn, they cannot produce ethanol, and if they cannot produce ethanol, then they cannot sell what they have not produced, and if they're not selling anything, they have no revenues to pay off their current loans = default).
I should point out that a shortage of corn due to recent crop failures has caused a sharp increase in corn prices that has exasperated the limited credit.
Also note that a shortage of ethanol will drive up the price of "gasoline."
What we're mostly talking about is cash-flow. ZFLenksystems buys parts on credit to assemble steering columns which they sell to BMW, VW, Ford and GM. If they can't get credit to buy parts, it generates a cash-flow problem that affects production and usually results in lay-offs or reduced operations.
How about taking some of the profits to purchase raw materials? I cannot understand why businesses cannot turn a profit and have reserve capital. We have had steady inflation for decades, I cannot see how an unlimited money supply cannot be inflationary.
So if this bail out somehow doesn't manage to pass, will we see major deflation and numerous financial failures, forcing the liquidation of tons of assets before the government starts printing up money like crazy to combat it? If that's the case, I might start hoarding cash to pick up assets dirt cheap before the government gets the presses going. What do you guys think about this scenario?
printing money in and of itself is inflationary. They will be devaluing the currency big time. No time in history have they printed up 1 trillion dollars at one go. Anyway, research the ka-p.o.o.m (without the periods). theory. It pretty much explains what you are talking about. It is by Economist Eric Janzen also, check out how money is made on google video. Will also explain some things
I should add Eric Janzen has been spot on in every step of the way for this particular downward spiral we are apart of. He has been on the mark since late 90s
Last edited by Wild Style; 09-29-2008 at 08:04 AM..
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Quote:
Originally Posted by Humanoid
The bill is no more inflationary then the actions taken during the Depression. It didn't cause inflation then and its unlikely to cause it now.
Its odd that we have depression like events yet people are still focused on inflation.
Anyhow, a lot of the speculative "hyper-inflation" arguments were based on an inaccurate ideas about decoupling. But as is becoming clear, Europe is going to do just as bad as the US in all of this. China is slowing etc. This is a global event. There really is no safe heaven....
You have a good point that the whole world is going to through a downturn. (At least I think so.) But we really don't know where all the other countries have positioned themselves in respect risk in the greater market. We do know this morning that the U.K., Germany and Iceland had to bailout out some of there financial intuitions. But other than that we will have to see how things roll out and see how many time, (if any) China, Japan (which is awash in cash), Canada, Saudi Arabia, etc, etc. Have to save there financial intuitions and/or industries. I haven't heard much about these places printing up tons of money to save their economies. But please if you have some information that I miss please send it my way. I'd love to read it.
And as wildstyle says in the next quote I pulled. Printing money deludes the value of the dollar and can/will cause inflation/possible hyperinflation cost to imported commodities, which in turn will probably cause anything that is produced domestically that requires to use some type of imported good to make will cost more (price inflation). So all this money we are printing is hurting us. Granted I will be very interested to see how much demand destruction there is for oil in the coming weeks and months. It there is a lot of it, even with the delusion of the dollar, this could take a bit of pressure of Joe six pack.
Quote:
Originally Posted by Wild Style
printing money in and of itself is inflationary. They will be devaluing the currency big time. No time in history have they printed up 1 trillion dollars at one go. Anyway, research the ka-p.o.o.m (without the periods). theory. It pretty much explains what you are talking about. It is by Economist Eric Janzen also, check out how money is made on google video. Will also explain some things
I should add Eric Janzen has been spot on in every step of the way for this particular downward spiral we are apart of. He has been on the mark since late 90s
Nice grab. And your right as usual.
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