If the US economy goes into a chainpin-esque depression, will it be inflationary (like post WW1 Germany), deflationary (like US 1930’s), or “stagnationary” (like Japan 1980’s)?
I’m thinking that with the massive public and private debt in the US that an inflationary scenario would be more palatable to those in policy positions to affect such things…
For reference:
Let’s get a fourth that we saw in the 70’s in the US, “stagflationary”.
The value of the dollar is um, not good outside our borders, but since I still pay my bills in US Dollars I digress. I think we will have inflation, which is always understated, that could make Jimmy Carter look like a genius.
Other than shorting a medical device company run by a bunch of well known morons which makes shorts a shoe in, I now own zero US securities outside my retirement plan. Take that from 2006 when I had 85% of my investments in the 3 major indices.
I don’t count gold among them b/c I don’t do ETF’s, only the real deal. As in a safety deposit box real deal.
The value of the dollar is um, not good outside our borders, but since I still pay my bills in US Dollars I digress. I think we will have inflation, which is always understated, that could make Jimmy Carter look like a genius.
A friend of mine thinks that’s potentially a bigger problem than many people realize; for the past who-knows how many years, the UD$$ has been the currency of choice for drug transactions, criminals, etc. When the shipping containers full of US $100 bills can no longer be used to buy ‘stuff’ anywhere else but the US, there will likely be a run on stuff in the US, causing alot of problems.
I dunno…
The value of the dollar is um, not good outside our borders
The dollar is, um, the de-facto international currency. And most widely held reserve currency.
If the US economy goes into a chainpin-esque depression, will it be inflationary
Only the first could be considered Chainpin-esque.
But my vote is Japan-like. Not a “crisis” just decades of flat-lining.
If the depression was chainpinesque (love that word), then by definition it would be deflation followed by hyperinflation. That’s not a matter of economic prognostication, but of reading what CP thinks.
The value of the dollar is um, not good outside our borders
The dollar is, um, the de-facto international currency. And most widely held reserve currency.
This either went right over your head or you misinterpreted what I meant by dollar value overseas. Read up on American depository receipts, FDI and repatriation of foreign funds. Having the US Dollar as a reserve currency has absolutely nothing to do with making money in foreign investments, only the currency exchange and dividend handling. That is why I digressed to how my dollar works for necessities of daily living and not wealth building.
Just hold your breath if cap gains goes to short term rates across the board…500 S&P in 48 hours.
This either went right over your head or you misinterpreted what I meant by dollar value overseas.
I guess I did misinterpret you. You meant something to the effect of that exchange indices, like DXY, have been declining. True. Not necessarily a bad thing, though. Good for U.S. exporters and competitiveness of U.S. labor in international markets. Which, they need help.
Japan is the most likely scenario in terms of relatively high, lingering unemployment, and low consumer confidence.
Spent some time yesterday on the phone participating in a panel discussion with some writers from the Atlantic & some investors/economists/financiers; the general feeling/agreement was that the next 2-5 years are going to see a substantial diffusivity in the recovery dependent on which socio-economic class you belong to, or more importantly, work for/to. In a nutshell, the middle-class and higher are actually enjoying a relatively robust recovery, and goods/services/business that are consumed by this demographic & higher are doing well. However below middle-class the reverse is unfortunately taking place, as there are few signs that a recovery is underway. The general consensus was that there was going to need to be a massive shift/re-alignment in the training/education/skill-set of an entire generation in order for the lower-middle class & below to recover. The traditional trades/low-skill jobs that are the base to the lower-middle & below economic classes are/have vanished, and are unlikely to return.
If the depression was chainpinesque (love that word), then by definition it would be deflation followed by hyperinflation. That’s not a matter of economic prognostication, but of reading what CP thinks.
Yah, I suppose technically you are correct. I used “chainpinesque” in the more general sense of economic meltdown…
The value of the dollar is um, not good outside our borders, but since I still pay my bills in US Dollars I digress. I think we will have inflation, which is always understated, that could make Jimmy Carter look like a genius.
Other than shorting a medical device company run by a bunch of well known morons which makes shorts a shoe in,** I now own zero US securities** outside my retirement plan. Take that from 2006 when I had 85% of my investments in the 3 major indices.
I don’t count gold among them b/c I don’t do ETF’s, only the real deal. As in a safety deposit box real deal.
By “US securities”, I assume you mean US stocks traded in dollars, right? You’re not talking about Treasuries, are you?
Wouldn’t US stock prices rise in an inflationary environment where the dollar tanks?
Japan is the most likely scenario in terms of relatively high, lingering unemployment, and low consumer confidence.
Spent some time yesterday on the phone participating in a panel discussion with some writers from the Atlantic & some investors/economists/financiers; the general feeling/agreement was that the next 2-5 years are going to see a substantial diffusivity in the recovery dependent on which socio-economic class you belong to, or more importantly, work for/to. In a nutshell, the middle-class and higher are actually enjoying a relatively robust recovery, and goods/services/business that are consumed by this demographic & higher are doing well. However below middle-class the reverse is unfortunately taking place, as there are few signs that a recovery is underway. The general consensus was that there was going to need to be a massive shift/re-alignment in the training/education/skill-set of an entire generation in order for the lower-middle class & below to recover. The traditional trades/low-skill jobs that are the base to the lower-middle & below economic classes are/have vanished, and are unlikely to return.
Retraining for what fields?
Wow! that debt clock makes me want to throw-up every time I study it 
I have been following Peter Schiff’s video Blogs and I thing Chainpin and Peter are on the same page! Peter explains things in in a big picture easy to understand kind of way that makes it hard to refute. I hope he is wrong but living in Calif. we are already starting to see the major damage that is being done by the out of control spending made by politicians. I really don’t believe you can spend yourself out of this recession and gimmicks of the past are not working. There is a good reason gold prices have gone up about 1000% in the last ten years and ain’t because people have a lot of faith in the dollar.
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Economics 101: Peter Schiff Explains “Why We’re in Such a Mess”
http://www.youtube.com/watch?v=yCH7al5KkNA
Peter Schiff 2006þ
http://www.youtube.com/...p;feature=grec_index
The Schiff Report
http://www.youtube.com/...rt#p/u/3/U4xMH6xXZEo
I’m going with the Japan’eque scenario.
In essence at some point our “Value of goods produced” has to start to fall inline with the global market and eventually our lifestyle as well.
What we’ve been doing for the last several decades is “Borrowing” or spending savings to support a lifestyle.
I think we’ve hit our credit limit, possibly gone over, and now we have to knock down the line of credit. That means quality of life will likely be closer to value of goods produced, which will be less than what we are used to.
Only when we start to hit an equilibrium point with the global market will we see a start of a real uptrend again.
I think Mopdahl may be correct as well as the upper and upper middle class often times have income based more globally and on company performance rather than local wages versus global wages. So if certain areas of the global economy is doing well they are more likely to see a more robust recovery than lower and lower middle classes that are more dependant on local competitive wages and competing directly with global wages versus company profits.
IOW if you have money, can invest it and exploit profits being made in the lower wage markets you’re going to make money. If you’re stuck competing against those wages you’re going to see a degradation in lifestyle.
~Matt
Retraining for what fields?
“…well soon, the world needs ditch diggers”
This is where the rub is, and where I personally think we are missing a huge opportunity. Basically I’m in Friedman’s camp on this one: green energy is likely one of the next great growth industries, and we as a country are sitting on the sidelines instead of getting ahead of the curve. China & German are already WAY ahead of us in terms of manufacturing & product development. We are going to miss out, and regret it for the next 50 years.
green energy is likely one of the next great growth industries, and we as a country are sitting on the sidelines instead of getting ahead of the curve.
Making “Green technology” is no difference than making screws. We actually make a good portion of the machines that actually make the solar panels. Problem is that all our other costs are not competitive to actual RUN the machines…so we sell the machines to China.
Soon enough China will steal all those ideas as well and start making their own machines.
Either you’re competitive, or your not. If you can’t be competitive making a screw you probably can’t be competitive making a car, a plane or “Green technology”.
The only thing that that’s “Unfair” about this is that China is pouring a CRAP LOAD of government funds into some of these sectors. Not sure what the best way to fight against that is.
Of course eventually that train has to come to an end to, not sure where this country would be when it finally does though.
It’s not really a matter of “retraining” for new jobs as much as it’s a matter of retraining the mentality that we somehow deserve a certain lifestyle and level of quality of life. It’s simply really, people but the cheaper product of the same quality. Either you make a better product, or a cheaper one or both. If not, your product isn’t going to sell.
~Matt
I’m not refuting Peter. He’s more knowledgeable than I am.
But when you expand the those two graphs a little further out, you get a very different story.
Which is to say, you could easily produce a dozen of graphs similar to the ones you posted by cherry picking data over the past 50 years.
Basically, for 90% of the past 100 years the DJIA has used gold to mop up the bathroom floor. Gold has been the DJIA’s “beer wench.”
I know, I know “this time it’s different.” But whenever you hear an expert saying that, remember all the experts saying that in 2000 and 2006.
Wasn’t it inflation that made gold prices go nuts n the late 70’s early 80’s?
I have vague recollection of “Gold” being a regular discussion bit around my grandfathers house. Seems they were all buying gold Krugerrand with the idea they would all be rich.
My guess is, probably like many people today, they bought high and sold low or haven’t sold them yet :-). Now if a person bought in 76’ and sold in 80’, but I don’t think that was the case.
~Matt
**Wasn’t it inflation that made gold prices go nuts n the late 70’s early 80’s? **
Yes. But the black line in the graph is the inflation-adjusted version. Which shows that the “real” price of gold still shot up in the 80’s. It got to about ~$850 then vs. ~$1200 now. Whether that means it’s just a bigger bubble or a sign of an actual structural change in the markets that will persist for decades, I have no idea.