Posted on 01/13/2009 12:03:21 PM PST by An Old Man
I am going to write here about a coming depression in general terms. I have some suggestions for how to prepare, (as if anyone can). There are two types of depressions, hyperinflationary and deflationary. The end results are the same.
My last article, Chaos, talked about the unpredictability associated with the logistics equation. Logistics equations have been shown to be intimately tied to our economic life and looking at them, they compare the consumption of a resource to the supply of the resource. Now I'm not going back into it and I'm just going to speak generically.
First, the main thing the logistics equations suggest is that when the economic system becomes unstable, it is not possible to determine the outcome.
Let me be a little more specific. There are debates going on now, as to whether we are going to see hyperinflation, or deflation. Frankly, I don't see a heck of a lot of difference. Both of these phenomena mean that our economic life as we know it and depend upon are coming to an end. The implications of chaos are that we do not know whether it will be inflation or deflation, to me. I may do some research on this to use logistics equations to look at the inflation vs. deflation debate later. But the point is, we don't know whether is will be one or the other.
The same dilemma applies to our gigantic investment community. Whether it be the bond market. or the stock market universe, or the par excellence market-- gold, there are indications of both inflation and deflation in the winds. As I said, in the chaos article, the gold and bond markets are indicating to me a deflation to come. Not hyper inflation. However, as I said in that article, if the US government decides at any point to forgo its obligations, then we will indeed see a collapse of the US dollar, and ensuing hyperinflation. That decision has not been reached by either the market or the US government as of this time.
Now then what can I see coming, and what can we do about it?
Please let me know if you can figure it out!
ping
Too much liability, not enough accountability, as prescribed by our wonderful governmental oversight
The dirty truth about economics is that you cannot predict the micro from the aggregate. If the dollar is no good, you will have a shadow, or black, market emerge. Markets are like climate, a large manifestation of billions of unrelated events. We can however see which way the wind is blowing.
relax everyone, by next Friday everything will on the upswing and not to worry.
Yep! Obama’s gonna fix all this. He’s even going to pay my mortgage!
“There are two types of depressions, hyperinflationary and deflationary. The end results are the same.”
Not necessarily true. Of the two, I think hyperinflation is probably worse, because then the credit of U.S. becomes so tainted that it becomes very difficult to ever regain the trust of potential investors. As an extreme example of hyperinflation, consider Zimbabwe, probably the worst country in the world to live in. Even though hyperinflation might help me personally in the short run, because I have a lot of my mortgage still left to pay, I’d rather take my chances (if I had a choice, which I don’t) on a deflationary scenario, because we’ve been through that before (great depression), and eventually came out of it stronger than ever.
“There are two types of depressions, hyperinflationary and deflationary. The end results are the same.”
He is right. The end result is the same. But I think this guy makes it more complicated than it has to be. Deflationary depressions are not different in kind from hyperinflationary depressions. They are different only in degree. For both are caused by inflation, and both end in deflation. It’s just that the latter, hyperinflation, is much more spectacular than the former.
“The dirty truth about economics is that you cannot predict the micro from the aggregate.”
That’s because there is no aggregate. It’s an academic fiction. All there is is micro.
“Not necessarily true. Of the two, I think hyperinflation is probably worse”
You’re right, but I still take the author’s point. Hyperinflation is not fundamentally different from deflation since all deflation is usually caused by inflation in the first place, and hyperinflation always ends in deflation when the currency collapses.
It can get really confusing (at least for me). So which do you think it will be?
I vote for deflation. I got a few bucks stashed away and I am just waiting for land prices to fall. (Hope to get that 10 acres in the country to retire on one day.)
Call it anything you like. Give it any label you like. But it is just one big mess. And the mess is hurting a lot of people and many businesses.
Call it anything you like. Give it any label you like. But it is just one big mess. And the mess is hurting a lot of people and many businesses.
Hold on to your stash for a little while longer. You may end up with the King Ranch.
on FederalReserveFriday eh?
Really? All I got was a lousy tank of gas.
“So which do you think it will be?”
Deflation, at least for a little while. Eventually, the money the Treasury and the Fed are pumping in will lead to another speculative bubble. But there’s always lag time with these things.
Then again, what do I know?
That was when private property really meant something. In today’s post-Kelo world, it would be the government, not your friend’s dad, that would end up with the King Ranch.
As a matter of fact, the hyperinflation/deflation argument has been raging among those involved with the precious metals market, and the jury is still out. Nobody knows for sure.
On the one hand, Bush and Paulson have just thrown several trillion dollars of unbacked money into the pot, which would seem to be inflationary. On the other hand, all markets and commodities have plunged, wiping out many trillions of dollars in value. The Fed is determined to avoid deflation at all costs, but it’s not clear whether they will have the power this time, or will find themselves pushing on a string.
The long T-bond market is one indicator. It skyrocketed higher as people fled to safety, suggesting deflation, then it turned and started to crash a few weeks ago. Now it has paused and the drop may be over. Where will it go from here? I sure don’t know.
Here’s the TLT chart for long-term treasuries, suggesting this uncertainty—first a violent move one way, then a violent move the other, now a pause to consider:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID530404&cmd=show[s61320502]&disp=P
Assuming that the federal government continues to make a right royal hash of things, and currency suddenly becomes nonsensical, it is both legal and reasonable to create a local currency.(*) This was done in the Great Depression, and communities that did so were more prosperous because of it.
So what is the value of local currency? Simple, it is designed to keep local commerce flowing, by issuing a token currency that can be used as a medium of exchange in commodities swaps. Based in things that people have in excess vs. how many people want it. And it can also be used to pay for services.
Likely, in a time of deflation, when nobody seems to have any currency, it “fills the gap” with a currency that is stable, like the dollar bill is right now. And in a time of hyperinflation, it substitutes for having to carry around a thick wad of cash just to buy something small.
The value of the alternative currency is set locally, based on the commodities available. If somebody has 10 bushel baskets full of grapefruit, this time of year, it will be less valuable than pumpkin which is out of season. Then again, if nobody wants fresh pumpkin, its value will be lower as well.
Alternative currency can also be used in a complementary manner with “real” currency, as well, so those who have real currency can swap it back and forth with the alternative currency. Which can also be used to balance deflation or inflation.
Under many circumstances, alternative currencies are still subject to sales taxes, and need to be strictly regulated, internally, to insure those taxes are paid.
(*) Importantly, the recent Liberty Dollar was both inherently stable and reasonable, but was crushed by the federal government because it offended them by backing its currency with specie (gold, silver, and copper), and not being crystal clear that it was not a legal tender issued by the government. (Though any excuse would do. It ended up with the government just taking their specie, and not arresting anyone.)
My wife says trying to figure out what to do as an investor is now like playing checkers with a three year old. Every time you make a move the three year old changes the rules because he changes his mind. That is what we have with the Goldman Sachs cronies running the show as they desperately try to save their wealth at our expense.
Deflation is king now because the derivative death star is slowly unwinding in spite of huge cash in-flows from the FED. Total wealth is being destroyed faster than they can replace it (fire up the printing presses). Hyper-inflation is by far the worse scenario and could happen if these guys print so much money that no one values it anymore. The only thing that may matter if we go over the cliff is things with real value vs. paper value.
We are now preparing a huge garden and greenhouse. Have started keeping chickens, too. Property is too small or else we would get some goats, too. - Doing our small part.
Yes, no or maybe. Last week I was searching for a place to purchase some Gold and ran across an article describing what happens when you make your own money. Look here
There were others that made the funny money work. See the Aberhart Dollars Time Magazine, Monday, Aug. 10, 1936
What else can we do? at the bottom of this article is a link to another one by Chris Laird entitled Subsistence Crisis". In That article he discusses some things other than financial that may require some attention.
might want to grab that land asap - and make a good garden plot - put up a chicken coop and rabbit hutches.
No one is paying any attention to it, but the trucking industry is in peril...you would be shocked to know how bad it is out there right now...
And about all most people know about the trucking industry is to curse the big rigs on the road.
Better think about this: If you bought it, a truck brought it.
Tens of thousands of trucks are off the road in that past few months - more 100's each day and 0ver 1,000 trucking companies have closed in the last year.
The truckers that are still on the road are, after expenses, get next to nothing in their pockets - often negative settlements for a paycheck.
The trucks stop rolling, the grocery stores are empty in 2 days. The other stores in a couple weeks.
Can you feed your family for a few months with foods you have on hand? Can you replentish your food with a garden?
Do you have a way to heat your house without oil or gas?
What it comes right down to, we are going to have roll up our sleeves and get prepared to depend on ourselves to get through this.
I was a kid in the 30's 40's...lived on a farm with my grandparents. At the time, about 86% of Americans could supply most of their daily needs, as to food, heat, etc.
Now - I doubt that number is 20%.
I have the letters from my daddy to my grandparents during those years. It was harder than most of us today could fathom. It will much harder this time as society has become all but totally dependent on outside sources, rather than on their own reliance.
Even an acre of land can provide a households food needs - but for heat, using wood, you'll need a good 10 acre wood lot.
In the meantime, you might want to put in some rice, beans, and other storage items.
The "Mormons" have been advocating up to two years worth of storage - of foods and other necessary goods - for times of emergency, which can come in times of illness, unemployment = or a thoroughly corrupt government.
Better to have extra oil for those oil lamps...Indeed, it might be prudent to link up with neighbors, friends and relatives in your area and share plans for getting through what's likely coming. The more people around you that are prepared, the better chance of making it - i.e., it they have their own supplies, they won't be coming after yours.
But I'd get that land now - before the horse is not just out of the barn, but has disappeared over the hill...
Clarification
Right now, we are deflationary, as just like during the Great Depression, the money supply has been drastically reduced - this time by the collapse of credit markets. Asset prices have deflated as witnessed by the stock market and housing markets. All businesses are cutting back prices wherever possible to try and stem the hemorrhage wrought by the shock to consumer markets and consumer confidence. As goes housing, furniture markets also go - since they move in lockstep - and some home furnishings producers/resellers have seen drops in sales of nearly 60%!
Recruitment firms in California are now trying to place executives in Europe wherever possible as there are no jobs on the left coast.
Deflationary & Inflationary?
How can that be?
There are systemic problems with the overall system of fiat currency and central banking that nobody but Ron Paul has even noticed.
Obambi is attempting to be the second coming of FDR - which will be a resoundingly disastrous attempt at amateur economics.
Remember - The government only has two controls over an economy:
Things are different now than they were during the Great Depression - back then, there were no credit cards, there were not many mortgages and credit markets were FAR smaller. America was a blue-collar nation that paid cash.
Things are different now, and a 1930's solution that did not work then, is less likely to work now.
250,000 jobs lost on Wall Street, and Obama is going to give them all a shovel. Infrastructure? We have the best infrastructure in the world. Besides, after Katrina, the diptards in NOLA didn't even want the rebuilding infrastructure jobs, so they had to hire Mexicans.
What the hell is Obambi thinking?
Stock up on food.
Buy ammunition.
There is a far bigger Ponzi Scheme than that which is about to blow up big time. Just when you thought it could not get any worse, one of the biggest frauds perpetrated on the American public by one of the worst presidents and frauds in our nation's history is about to implode.
Social Security.
In case you have not noticed, it's a Ponzi Scheme.
In case you have not noticed, it is not doing well.
In case you have not noticed, the baby boomers are retiring.
Admit it - all of your life you knew that Social Security was going to blow up some day...
It almost makes one start to think about 'unproven' theories by mathematicians and wannabe economists such as Kondratieff... what the heck, the theories of Stiglitz were never proven and he got a Nobel Prize in Economics. Kondratieff's theories actually follow known mathematical theories with regard to fractal mathematics and their coincidence with human economic activity.
Then there's "Castastrophe Theory"...
I referred to the Liberty Dollar with my asterisk. And I could have told them they were risking a lot by backing their currency with specie.
Technically, even when it was unlawful for individuals to own gold, if the gold was not processed, that is, gold ore or nuggets, it was still technically legal. However.
The miners who worked the Homestake gold mine were there to dig great tons of ore, day in and day out. But every now and then, they would find a gold nugget, that they would put in their pocket and take it home. Often they would have coffee cans full of found nuggets just sitting in a tin shed in their backyard.
Then out of the blue, federal agents would swoop down on them and take all of their nuggets, without so much as a thank you. And back then, hearing of their tale left a lasting impression on me.
The important lesson is that the government has no sense of humor when it comes to specie. The Liberty Dollar people made the mistake of backing their currency with it, when they should have expanded their underwriting with many other stable commodities.
Certainly they could have had some gold, but not enough to “matter”. Instead they could have stockpiled enormous amounts of other things and the government wouldn’t have batted an eye—as long as they very scrupulously paid their sales and income taxes.
But whenever you deal with gold, you have to deal with its side effect, gold fever. And the government is just as prone to get it as anyone else.
There’s no such thing as “rhodium fever”, but right now rhodium is more valuable than gold at about $1000 an ounce.
Might want to consider rabbit hutches - takes little room and provides good food. And the hides make good fur for mittens, hats, leggings -
Also, a couple dwarf apple/cherry trees. They take up little room, produce much quicker - and yet the fruit itself is full size.
And also, put in a good store of 'dry goods' like rice, beans, lentils, dried peas, sugar, flour, etc etc.
Learn the edible/medicinal plants in your area. Learn the plants that can be used for teas/'coffee' - for tea, for ex: clover blossoms and leaves, rose petals and rose hips, raspberry, strawberry, blackberry leaves - and Bee balm is easily grown. the bees and butterflies love it, it's a pretty flower, it comes back on its own...its what the colonials used for tea after they had the Boston Tea Party...It's also called "Otswego Tea" - the Indians taught them the use of it.
There are so MANY was we can prepare ourselves for whatever may come down the pike - or more likely, may NOT come down the pike, as the trucks stop rolling all together...
for your use of greenhouses, you might want to look into Eliot Coleman's method - he grows vegetables year 'round up here in Maine - (Farmer's in the 1700-1800's knew how to grow some veggies in the deep of winter - utilizing the heat generated with compost piles...)
Bottom line, we are first and foremost, the first line of defense for ourselves and our families...
http://www.amazon.com/gp/reader/1890132276/ref=sib_dp_pt#reader-link
I don’t think it is a debate between deflation and hyperinflation. What is coming is deflation, followed by hyperinflation. Obviously your investment strategy should be different for each phase. Setting your strategy for one or the other is foolish, I think, as you lose half the time. The key is to set up for deflation now, and shift strategies as the situation changes....
hh
Everyone is knocking the 'gold bugs' these days - again, by pointing out the current price of gold. We are still in the deflationary phase - things only just blew up.
The inflationary phase starts after January 20th.
No matter how much Obambi tries to inflate his way out of this, he simply cannot print enough money, and this problem is not going away during his administration. Why do Democrats always think they can spend their way to prosperity?
But if you MUST spend...
The other problem which I did not even begin to address in my previous rant was the fact that military spending is anathema to the Obamunists.
Even though I am not a believer in Keynsianism nor it's equally twisted cousin Neo-Keynsianism; spending money the way Obama plans on government make-work programs is a far worse salve than spending the funds on military items... and not because I am some kind of war-monger.
At least spending money on a military build-up like Reagan did, puts money into the private manufacturing, engineering and technology sectors. We Americans make little else in our own country - most consumer items aside from furniture are imported - and even that sector has a large import segment (like all sectors - except military armaments & equipment). [When is the last time you bought a toy made in the USA? Even Tonka {Minnetonka, Minnesota} makes stuff abroad these days.]
So if you must be a Keynsian, at least spend it on something you make in your own country... but no, the Obamunists know better...
Excerpt: “It will only take the amount of time that the worldwide inventory of goods is exhausted, since many factories and production centers will become embroiled in payment disputes with their customers and suppliers, so that deliveries are delayed first, then canceled.”
I don't see a date for when this was written, but I have family in the trucking business - long hauler, mostly foods.
The above is already happening = it's a real crisis and neither the media nor Washington is going to alert us.
Those of us who don't take immediate action to supply our family with the bare basics, are going to hurt a lot harder. Everyone will have at tough time, but sitting back, dependent on the outside world for supplying our daily needs has been playing Russian Roulette.
Time is growing shorter every day = there are ten of thousands of trucks OFF the roads in just the past year - and more every day. Shipping is drying up at an alarming rate.
Remember: If you bought it, a truck brought it.
And when the trucks stop rolling, your grocery store shelves will be empty in 2 days - other stores in a couple weeks.
What do you have in YOUR cupboards?
The northeaast moonbat land is doomed!! Doomed I say.
There are two types of depressions, hyperinflationary and deflationary. The end results are the same.
At the Suntrade Institute we have been saying this for a long time. Inflation and Deflation are two forms of the same thing: POVERTY.
The depressing thing is the United States could be so far above that, we would be the envy of the world. How?
Utter energy independence, using renewable, nuclear, and fossil resources, derived within its own geoconstitutional boundary.
The Council on Foreign Relations, Rockefeller, Kissinger, Soros, Hillary, and the boys, do NOT want this.
They have enough in Switzerland for themselves to be independent. That is the "globalism" aspect, and they have other agenda's.
So, they choose individuals so enslaved by their own EGO's they can be fronted and manipulated, exactly like Barack Obama, and Hillary.
This is the psy-ops of the LEFT. Use the EGO to dominate rational thinking. It is done with Hollywood actors and Nashville singers every day: "come here boy we're going to make you a star." It is the psychological profile of the Democrat, ego enslavement.
The United States of America is in a relatively good position, planet-wise, resource-wise. The United States of America is being crippled by the Council on Foreign Relations and the globalists.
And George W Bush, my soul mate, was a puppet for it all.
"They" hate Sarah Palin.
Johnny Suntrade
That would make it a criminal offense to put in emergency storage supplies - and they go even further. If they suspect you have such storage, they will come after it - ‘for the good of the whole.’
I'd put in some supplies, but I wouldn't advertise it to the general public... One of Communism's first tactics for a take over is to control the food supply. Be warned.
And spend your time, money and energy, first, is seeing that you can, at the least, feed your family. If that's not done, not much else matters. You may have bought a lot of gold against the coming days - but can you make soup with it?
That's what I've been saying. The government and Fed are going to flood the money supply to try and kickstart loaning again, but by the time it does re-energize the loaning process and the resultant increase in capital investment and market output, they will have so over compensated and flooded the money supply so much that the pendulum swings violently back the other way from deflation to runaway inflation. Is that consistent with your assessment?
The article dates to 2005.
The above is already happening = it's a real crisis and neither the media nor Washington is going to alert us.
I understand the logistics, I really do. Last week we drove into town to get some more food. The shelves looked like the store manager had fired all the help. It was easy to see that stocks were running low. But, in our case things got downright serious. They were completely out of the item we were seeking, and had stocked the entire shelf with one row of what they did have. As people purchased the cans one at a time, the entire shelf began to look empty.
The excuse, a snow storm had blocked the pass and nobody could get through. I bet you thought that living up here in Galts Gulch was without problems didn't ya.
Hi Old Man,
Your tag line has been our family motto as long as I can remember.
Way ta go!!!
Wait a minute, he is also supposed to pay for my gas and car payment.
I expect him to live up to it.
The value of the alternative currency is set locally, based on the commodities available. If somebody has 10 bushel baskets full of grapefruit, this time of year, it will be less valuable than pumpkin which is out of season. Then again, if nobody wants fresh pumpkin, its value will be lower as well.
We will have both.
Obambi has already made known his intention to hyperinflate by spending, spending, spending his way to some illusory prosperity.
This has got to be one of the stupidest articles Ive read in a while.
No difference? Deflation is temporary, hyperinflation is forever. You debase the currency and default on obligations, and you have total chaos and the wiping out of all wealth not sent overseas. Deflation , OTOH, is a necessary component in de-leveraging, which is what we have to do, as a country, right now. You can try to mitigate that, as the magic man is going to try, but it only makes recovery that much longer
Trashing the currency altogether is insane, especially when you are talking about the currency of choice, the dollar. IMO, whoever wrote this is an idiot.
Ping
bump for later
BINGO!
Why doesn't anybody else understand this?
We are currently experiencing deflation.
The inflationary spiral will begin after Jan. 20th
During the Great Depression, the money supply contracted by 30%.
Nowadays, credit has been used to expand the money supply. Credit has just dried up. The effect is exactly the same as a collapse in the money supply. Deflationary.
Come January 20th, the Obamunist takes over and has promised to stoke the fires under the printing presses and begin printing mountains of money that he will spend on infrastructure and other government programs. Huge inflation, and it will not do a thing to create new business nor real jobs. It will create hyperinflation.
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