OT (or maybe not): Do you believe INflation or DEflation for the next 5 years?

[fantastic_four]

There is also a lot of talk about China becoming the next superpower (they have plenty of US dollars, becoming a world creditor). I know it sounds a bit left field, but without expanding too much on details, I get this feeling we just might witness another big war within our lifetimes.

 

Mutually assured destruction kept the peace between the US and Russia, why would it be different between the US and China?

[Shark]

comics are not liquid,its a hobby (WHO THE HELL IS OVERSTREET) however we baby boomers can do things from the TWILIGHT ZONE me included,God help me!. Best regards to all my fellow collectors.-- (hey I love americana) -- 7% in your investments to 10% but no more? P.S. its a scam just like 50% of wall street is, if the economy is well so is this great hobby,CGC saved us if its a money matter. Yeah like OVERSTREET can pick values,what B.S. I would love to have that power! GOLD,GOLD,PROPERTY,LIQUIDITY IS KEY! IN BAD TIMES.

 

i cant argue with this.

 

cant understand a word of it neither.

 

Me either.

[bronze_rules]

There is also a lot of talk about China becoming the next superpower (they have plenty of US dollars, becoming a world creditor). I know it sounds a bit left field, but without expanding too much on details, I get this feeling we just might witness another big war within our lifetimes.

 

Mutually assured destruction kept the peace between the US and Russia, why would it be different between the US and China?

 

There are ways to wage a war without the final option. And I wasn't necessarily pointing out China as a trigger.

 

There are other events upon the horizon (Iran gaining nukes (increasing ME instability), new relationships being forged, US being weak). Just looking at the cyclical aspect of human events; and as I mentioned, to every thing there is a season. We've had relative peace (particularly domestic) for a very long time.

 

Apologize, as I didn't mean to turn this into a conspiracy fruitcake thread... just thinking out loud.

 

[Silver Surfer]

Great thread keep it coming guys. Personally I don't see even a threat of higher interest rates for at least a year and half maybe two. The economy is way too fragile to start raising rates and potentially halt any recovery momentum it might have. I also think that high rates (7-8%+) are a thing of the past as I just can't see how the average family can survive with that kind of mortgage rates for any extended period of time. People are not spending money now so I just can't see that getting any better if rates are double where we are at now.

 

When the credit crisis hit about a year and half ago mortgage rates in Canada went to the high 5% range and the real estate market was dead, all the American and foreign buyers were gone over night. Sure there were other contributing factors but the banks and the Canadian Mortgage Mortgage Housing Corp have really tightened the approval requirements so I just can't imagine trying to qualify people in an 8% envrioment with presumably plummeting housing prices as people ditch their homes to get out of unaffordable mortgages. The US and Canadian governments are going to have to think outside of the box to dig out of this hole we are in.

[FlyingDonut]

Is there any truth to the possiblity of a North American Union between Canada/USA/Mexico and a common currency (Amero) for these three countries?

 

Some folks "predict" that the US gov't will purposely crash the USD and introduce the Amero as the saving grace.

 

Thoughts?

 

Andy

 

The short answer? No.

 

The long answer?

 

[Hedge Collector]

Great thread keep it coming guys...

 

..The US and Canadian governments are going to have to think outside of the box to dig out of this hole we are in.

 

I think this is what the US has been doing to its own detriment - PPIP, Cash for Clunkers, etc.

 

I view a family or even an individual as a microcosmic example of the economy. When you get in debt, you can continue spending but there comes a point when you reach maximum debt or credit. At that point, there is no choice but to save and reduce consumption in order to reduce that debt so that you can at some point in the future start spending again.

 

If someone gives you free money at 0% interest, you are not necessarily better off. You've just bought yourself some time. You've actually pushed the better years further out into the future. IOW, if you were set to spend again in 3 years, it won't be 4 or 5 years until you start spending again because you've simply borrowed more and delayed repairing your finances. In the meantime, the extra year of spending that you've allowed yourself by borrowing again at no interest is just to keep up the status quo.

 

If you can use the free time to repair your balance sheet (ie. find a higher paying job, save money, reduce debt, etc), then the delay would have proved useful. Otherwise, it will only have proved useful in putting the inevitable on a temporary hold.

 

We are a nation of consumers, which I think is ok. But one has to recognize the fact that because of this, there will be years which we will be able to consume greatly and years of low consumption. And for those years of excess consumption, we will actually have to venture into years of increased savings as a result.

 

Bottom line - you can't improve a debt ridden society by increasing debt even further. Try it at your own peril.

[Silver Surfer]

Totally agree Hedge which is why this current envrioment makes me so nervous. I think a lot of consumers on a trolley that is out of control and there is no way to get off.

[Bronty]

Some folks "predict" that the US gov't will purposely crash the USD and introduce the Amero as the saving grace.

 

Beyond ridiculous.

 

http://www.snopes.com/politics/business/amerocoin.asp

 

Kind of like saying "let's crash the car so that the repairs will make it look real purty"

[Bronty]

There is also a lot of talk about China becoming the next superpower (they have plenty of US dollars, becoming a world creditor). I know it sounds a bit left field, but without expanding too much on details, I get this feeling we just might witness another big war within our lifetimes.

 

Mutually assured destruction kept the peace between the US and Russia, why would it be different between the US and China?

 

There are ways to wage a war without the final option. And I wasn't necessarily pointing out China as a trigger.

 

There are other events upon the horizon (Iran gaining nukes (increasing ME instability), new relationships being forged, US being weak). Just looking at the cyclical aspect of human events; and as I mentioned, to every thing there is a season. We've had relative peace (particularly domestic) for a very long time.

 

Apologize, as I didn't mean to turn this into a conspiracy fruitcake thread... just thinking out loud.

 

I agree with that actually.. its a bit scary to think about. The US really can't afford another war and everybody knows it... everyone can act a little spunkier without fear of the hammer coming down.

[delekkerste]

I don't necessarily agree with everything here, but it's an interesting read:

 

Daniel Shaffer

On Jobs, Credit and Fear - RealMoney.com

10/2/2009 3:07 PM EDT

 

Today's unemployment rate came as no surprise to me. My analysis continues to indicate that we are in the beginning of a long and deep deflationary environment that targets a low in the stock markets in 2012 and a peak in unemployment in 2013 to around 22%. This is a similar pattern to the 1929-1933 beginnings of the Great Depression.

 

The great credit bubble has burst and it could take 10 years to clean out the excess in the system. In my opinion, the 30-Year Treasury is signaling a low-interest-rate environment for many years. With current short-term rates near zero, we surely should have had a better number today. I do not believe in the "green shoots" that so many grasp onto, and I expect that the worse is yet to come.

 

There is more to this new environment than the financial markets. Business owners and households are afraid to spend any excess dollars due to some type of fear. Restaurants are not as full as they need to be. I now can get three suits for the price of one at one retailer (I saw the commercial last night!) and Mets tickets are being reduced because the owners see that fans don't have the excess capital they once had to enjoy the experience.

 

I believe we will experience hyperdeflation as prices need to come down to meet the low demand. You can mostly control inflation, but deflation is like the flu -- it has to work its way through the system and burn out. The money and stimulus pumped into the economy over the past year has gone nowhere. It will just prolong the inevitable, similar to the Japanese experiment that failed. Companies, large and small, will continue to cut expenses, including payroll, just to survive and try to keep margins at reasonable levels to support stock prices. As margins continue to get squeezed, so do stock prices.

 

Position: n/a

[bronze_rules]

hyperdeflation

 

Like I said, please call my insurance company, as they didn't seem to get the message.

Also, tangible necessities like food and gas don't seem to be dropping that much

(come to think of it though, gas did drop off a cliff from its lofty heights).

Feels a bit like stagflation from that POV.

 

I hope your scenario doesn't play out. But it is definitely conceivable.

 

I'm really wondering how people are going to be able to afford insurance with their "sky is the limit" rate hikes every yr. It's sort of like allowing mortgage/income rates to the sky in the housing buble, when wages were flat. Anyone think insurance premiums will crash anytime soon?

That would be a lot more food and comics in my belly and pockets.

[qualitycomix]

But isn't it fascinating that we are fast approaching 30 Million unemployed and underemployed people in this country, yet certain comics are still setting record prices.

 

I am not one to fall for the asset shift that money went from the stock market to our hobby. It sounds good in theory, but I've never heard of anyone with that mindset. In fact, I found the opposite to be true, in that I know of a few that spent less on books because they had lost so much in the market.

 

I am in the deflation camp. But I'm intrigued that we haven't had any significant correction in value in the high grade books.

 

I don't buy that high grade books hold their value because of the supply/demand imbalance or their perceived premium. The high end art market took a dive because of the credit crisis and recession.

 

There is a flight to quality right now. That is the contraction/evaporation effect that I was speaking of earlier. Blue chip collectibles are one place RIGHT NOW that are holding up. Over the long term, who knows? It just depends on how bad the economy gets.

 

If T-Bills, bonds and fiat currencies take a big dive, you can bet that will have a detrimental effect even on high end, blue chip comics.

 

For now, any place investors deem it "safe" to park their money and possibly get a reasonable return, they will flock to those avenues.

 

Gene can probably speak to this better than me, but I'm not sure that there are many regular investors left in the stock market. Mostly speculators and institutional investors. But that's just speculation on my part.

[Zonker]

He may be correct about where this is heading, but I'm not sure why he's looking at today's unemployment numbers as vindication for his position. Has employment ever been anything but a lagging indicator? In contrast, the stock market-- as a leading indicator-- on March 9 forecasted a bottom in the real economy sometime later in 2009...call it 6 months later or September-ish. Using this simplistic model, even in the best case we shouldn't expect much improvement in employment until next spring.

[qualitycomix]

hyperdeflation

 

Like I said, please call my insurance company, as they didn't seem to get the message.

Also, tangible necessities like food and gas don't seem to be dropping that much

(come to think of it though, gas did drop off a cliff from its lofty heights).

Feels a bit like stagflation from that POV.

 

I hope your scenario doesn't play out. But it is definitely conceivable.

 

I'm really wondering how people are going to be able to afford insurance with their "sky is the limit" rate hikes every yr. It's sort of like hiking mortgages to the sky in the housing buble, when wages were flat. Anyone think insurance premiums will crash anytime soon?

That would be a lot more food and comics in my belly and pockets.

 

Commodities have been going up in recent days/months, in part because the dollar is falling. IE you can buy less of the same commodity with a dollar since the Fed is printing money like there's no tomorrow.

 

So, the outlook is a bit confusing to some because the Fed is attempting paper over deflation's effects. But overall, we are in a deflationary environment, because the credit contraction is having a much greater effect on the economy than the Fed's effort to counter attack.

[qualitycomix]

He may be correct about where this is heading, but I'm not sure why he's looking at today's unemployment numbers as vindication for his position. Has employment ever been anything but a lagging indicator? In contrast, the stock market-- as a leading indicator-- on March 9 forecasted a bottom in the real economy sometime later in 2009...call it 6 months later or September-ish. Using this simplistic model, even in the best case we shouldn't expect much improvement in employment until next spring.

 

Tell that to the traders in 1930 when the stock market nearly recovered to pre 1929 levels. And subsequently crashed even harder.

[Zonker]

He may be correct about where this is heading, but I'm not sure why he's looking at today's unemployment numbers as vindication for his position. Has employment ever been anything but a lagging indicator? In contrast, the stock market-- as a leading indicator-- on March 9 forecasted a bottom in the real economy sometime later in 2009...call it 6 months later or September-ish. Using this simplistic model, even in the best case we shouldn't expect much improvement in employment until next spring.

 

Tell that to the traders in 1930 when the stock market nearly recovered to pre 1929 levels. And subsequently crashed even harder.

 

Like I say... he may be correct for any number of reasons, but citing today's 9.8% unemployment number-- not even 7 months after the stock market's (temporary?) bottom-- seems a silly rationale. Or at least unrealistically impatient.

[Hedge Collector]

Hyperdeflation? Deflation I get, but hyperdeflation?

 

I can't even fathom that. How is that even possible from current levels?

[delekkerste]

Hyperdeflation? Deflation I get, but hyperdeflation?

 

I can't even fathom that. How is that even possible from current levels?

 

I can fathom it, but think it is very unlikely. Basically, for hyperdeflation to occur, the U.S. populace and government must essentially reject the inflation/devaluation option and let deflation cleanse the system. It would be extremely painful and almost certainly politically untenable. I doubt whether we as a people, sad to say, have the intestinal fortitude for it. It is what should occur, but, I personally don't attach more than a low single-digit probability to it at this time.

 

Still, I think it is good to evaluate the entire range of potential outcomes, and to continually assign different levels of probability to them (and change them as circumstances warrant), so that one will not be blindsided no matter what happens. So then you'll know, and knowing is half the battle. YO JOE!!

[qualitycomix]

Hyperdeflation? Deflation I get, but hyperdeflation?

 

I can't even fathom that. How is that even possible from current levels?

 

I'm not sure that hyper deflation is a real possibility at this point, which in my mind, would mean a rapid depreciation of maybe 30% or more on core goods from current levels. There is no definition of hyper deflation, so I'm just making that up to have an idea of what it might mean.

 

I don't see an impetus that would cause that chain reaction. Deflation usually is a bit slower in it's effects than inflation, but is almost impossible to stop. Just look at Japan.

[bronze_rules]

http://globaleconomicanalysis.blogspot.com/2009/09/daniel-amerman-vs-mish-reflections-on.html