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Whether we suffer Argentina like hyperinflation or Zimbabwe like hyperinflation will depend on when government will stop the TARP and New New Deal spendaholic lunacy.
What the FED/government is doing doesn't even replace the money that is being destroyed. Every person that pays off debt, every person that defaults on a loan etc is destroying money. Focusing on what the government is doing without considering the money destruction throughout the economy is simply short sighted.....
This is not to mention, you guys have been predicting this for how long now? The exact opposite has occurred......
Anyhow, you can't really predict what is going to happen with inflation over the next 5~6 years. Things are likely to remain deflationary for a bit though.
I am told that it is possible, because the velocity of money has slowed. When money isn't circulating quickly, you can print as much as you want without inflation. Once its circulation speeds up - something we have no control over - then the currency could lose a lot of its value.
Isn't it what they are doing now by borrowing - increasing the liquidity to increase circulation (velocity)? Inflation is not on their short term radar. Once things start to move, Fed can always decrease the money supply (unless it allows things to move for too long). I think you are correct - there will be some deflation followed by inflation - hopefully, both can be controlled.
He's arguing that if hyperinflation will cause people's income to rise to such levels that they will easily be able to pay off the debts that were taken on when everything was cheaper (because the dollar bought more).
Say you have an annual income of $50K. You have $10K in credit card debt. High inflation sets in and causes the price of goods and services to sky rocket, which will eventually result in your paycheck skyrocketing because the system is flooded with cheapened money. Maybe now you will make $75K or $150K. Your credit card debt, however, still stays at $10K. You're in a much better position to pay it off.
Hi StoneOne,
Unfortunately that is a misunderstanding of what money is. The more we pay off debt in a fractional reserve system, the more deflationary it becomes. If all private debt were to be paid down we would need somewhere in the neighborhood of a 60 trillion dollar public debt just to keep the supply we have.
Is it possible to have some deflation with severe federal deficits over the next couple of years? Would the increase in the money supply itself make this unlikely?
Hi NewToCA,
Deficits increase the money supply, but yes it is still possible to have deflation if commercial debt does not keep up. With collateral still decreasing in value and unemployment going up the basis and creditworthiness of new loans does not look to cause much inflation even with trillion dollar deficits.
What the FED/government is doing doesn't even replace the money that is being destroyed. Every person that pays off debt, every person that defaults on a loan etc is destroying money. Focusing on what the government is doing without considering the money destruction throughout the economy is simply short sighted.....
This is not to mention, you guys have been predicting this for how long now? The exact opposite has occurred......
Anyhow, you can't really predict what is going to happen with inflation over the next 5~6 years. Things are likely to remain deflationary for a bit though.
Agreed. I think it'll be deflation for awhile. Possibly throughout 2009 and maybe longer. After that, who knows. Maybe things will just stagnate.
Agreed. I think it'll be deflation for awhile. Possibly throughout 2009 and maybe longer. After that, who knows. Maybe things will just stagnate.
Hi sheenie2000,
Its up to the Fed/Government plutocracy. If a newspaper said that they printed a million copies of their newspaper too many most people would expect the newspaper to print fewer of them next time. When it comes to money for some reason people feel differently.
And how are dollars worth less today? You're able to buy more with your dollar now.
I didn't say dollars were worth less today. You're the first person I've seen arguing that inflation is somehow good for the American public. Why would anyone want things to cost more?
I didn't say dollars were worth less today. You're the first person I've seen arguing that inflation is somehow good for the American public. Why would anyone want things to cost more?
Well, a little inflation actually can be beneficial for an individual. It depends upon a couple of items, having a fixed rate mortgage on a home you plan on staying if for an extended period of time, the home value increasing at the inflation rate, and and individual's monthly income keeping up with the rate of inflation.
What happens is you have a "base year" where the home was purchased, and let's say that the mortgage equals 30% of monthly take home pay. Using my assumptions in the previous paragraph, if inflation is 3%, over a 10 year period the mortgage payment actually drops to about 22% of monthly take home pay. All things being equal, this frees up 8% of your monthly take home pay.
Not arguing in support of inflation, just pointing out how it can be beneficial for an individual.
Definitly high inflation. Probably in the range of 10%.
Last edited by Waterlily; 01-13-2009 at 08:35 PM..
Reason: off topic comments removed
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