Hyper Inflation

[tobee43]

We cannot support the Social Security system as is without raising taxes or cutting benefits or both.

especially, when most of the social security system rest on the backbone of the young working class...and there are NO jobs for them after college...JUST hefty student loan to contend with.

Not to be the devils advocate here, however, let's NOT forget that social security was NOT designed to be a retirement pension. the ss act signed back in 1935...(or sometime around then) was enacted by roosevelt as part of his "new deal" never with the intention that people would stop saving and depend solely on the system to support their every need during their retirement years. we can't just blame the government for the handling of what has now become the largest government supporting program in the world.

on the other hand....who's really to "blame" here"...( I HATE THE WORD BLAME)...but just for a lack of a better word, i have and we have seen through the years, elimination of not only numerous jobs, by greedy business who built their companies with people and tossed them out to the wolves when they were no more useful for their needs. but by the use of cutting salaries, cutting health benefits, cutting retirement plans, just so they can make more profits....turning these once useful people into burdens once they reach retirement age, and who once were productive part of populous must now turn to the government to aid in the their financial and health care support.

a quick story i recall happening many many years ago, a woman in her early thirties that i worked with was extremely upset one afternoon, explaining her father, whom, at worked for ups for over 30 years and was getting ready for retirement within the next 90 days, suddenly, got fired!! as a result of their wordage in their contract at the time he, the employee, would have forfeited his hard earned pension due to the firing. i don't know what ended up happening to the man who gave so many years to this company, but at the time, many more stories began to surface with the exact same tale. someone just getting ready to "retire" who would get fired and have to fight to get what was theirs from the company.

while there are numerous theories as to the actual causes of hyperinflation.

"The reality is that hyperinflation is first and foremost set in motion and driven by a deteriorating fiscal situation. In fact, significant economic weakness and deflation is a precursor to hyperinflation. Too many analysts believe that there has to be some economic demand or some consumption to stimulate inflation or hyperinflation.. Printing money to try and stimulate your economy or excessive credit growth is what leads to inflation. Printing money because you are broke and can’t service your debts is what leads to hyperinflation.

i so agree with this statement,

[banca rotta]

especially, when most of the social security system rest on the backbone of the young working class...and there are NO jobs for them after college...JUST hefty student loan to contend with.

tobee43, you hit the nail on the head with this one sentence. It's not a doom and gloom mind set, Obama bashing or anything else that informed people like you and I keep repeating.

It's simple, 3rd grade math and what you said is what so many can't seem to accept.

Some sort of collapse is coming and there is nothing that can stop it. I wish I didn't have to keep on saying it but the numbers don't add up.

Too many liabilities at the state, federal, corporate, and individual level in the USA and other Western nations and Japan and there's not enough young people to keep this thing going.

Those able bodied people leaving college have too much debt with no job opportunities. How on earth can these grads invest in 401k's and buy homes like this.

[GoingDown]

Most people will have a hard time wrapping their minds around the events that have a real possibility of happening. Just look to the past of the many great civilations that have fallen. Simply put, ours is next. I might be selfish but I'm glad that I'm old enough to honestly say that I have no regrets from my life, no unfinished goals. People don't stop to smell the flowers these days, too bad, they will wish they had when they miss them. Whats to come? Horror....

I giggled when I read this one.

Even if the worst case scenario happens, the United States' standard of living is still so much better than any other part of the world, and will continue to be better than any other part of the world. It may get bad for awhile, but if you have done any travel to other parts of the world, like say South Africa for example, we are a long way from being that far down in terms of our standard of living.

Think about Rome when it fell. It was still a good place to live, relatively speaking when compared to the rest of the world during the middle ages.

I'm afraid some people will have to adjust their lifestyles a bit. I already have adjusted mine, out of necessity at first, and now eventhough I no longer need to live this way, I have become so cheap and miserly that I don't bother trying to go back to my old way of living. I just stockpile cash reserves and other basic necessities like food, clothing, etc., for when I need them. My car is old, very old, but in great working condition. I even learned how to repair it myself, with the help of a few friends, and now I don't worry about breakdowns, because I will just make the needed repairs by myself with cheap used parts. It is amazing how little you can get by on when it becomes necessary.

[albacore44]

i work in an industry that normally leads the country coming out of a recession. And yes, we are in an upswing and starting to hire. are delivery rates are accelerating. In fact were behind schedule. but not to companies in the US. The rest of the world is developing quickly and needs our products.

i think we are in for a rough time in the US. we have an aging population like Japan. we have become a service economy. we have exported our manufacturing base so we can compete on cost with the evolving world. service jobs don't pay like manufacturing jobs.

what i see is people becoming selfish and lazy. One of the big reasons we are in this mess, is we have made it too easy to take advantage of all the social programs. I know numerous people who are on SSI, but are quite capable of working. how they managed to pull it off i have no clue. when prisoners in prison are collecting SSI, as they are we have big problems in this country.

[catleg]

I found a great article on marketwatch that I think sums it up.
I'll just extract one paragraph here:

Let me write the conclusions first: Inflation, not deflation, will dominate the global economy. The deflation scare causes the central banks in the developed economies to sustain a loose monetary policy. It will fuel inflation in emerging economies. Through trade, currency markets, and ultimately inflationary expectations, inflation will hit developed economies.

Marketwatch article

So in other words, eventually we'll have cost-push inflation forced upon us from rising commodity prices even while we have high unemployment and no leverage against our employers for higher wages.

In other words, stagflation, or a currency collapse if they print too many dollars.

[tobee43]

And yes, we are in an upswing and starting to hire. are delivery rates are accelerating. In fact were behind schedule.

dreaming.....i know ca...i'm born and raised there....it's NOT happening in the rest of the country.

don't be offended please...head in the sand disease is what i call it. not seeing beyond one's world....

it's real, it's here...it's now...it's us.

[backtoschool]

I found a great article on marketwatch that I think sums it up.
I'll just extract one paragraph here:

Let me write the conclusions first: Inflation, not deflation, will dominate the global economy. The deflation scare causes the central banks in the developed economies to sustain a loose monetary policy. It will fuel inflation in emerging economies. Through trade, currency markets, and ultimately inflationary expectations, inflation will hit developed economies.

Marketwatch article

So in other words, eventually we'll have cost-push inflation forced upon us from rising commodity prices even while we have high unemployment and no leverage against our employers for higher wages.

In other words, stagflation, or a currency collapse if they print too many dollars.

I totally agree with this assessment. It will take a couple of years to kick in, and it won't collapse the currency for ten years or so in my opinion.

[MSbklawyer]

I totally agree with this assessment. It will take a couple of years to kick in, and it won't collapse the currency for ten years or so in my opinion.

But is the "collapse" of the currency like a sudden event -- one day it's not collapsed and the next it is? Or is "collapse" more like a gradual erosion of the currency until, ultimately, it is worthless?

And what is the best way to protect against it? Gold or other precious metals?

[Meatstick]

The only problem with buying gold and other precious metals is others must have something to barter with if the economy goes in the crapper and the dollar disappears. Then you must have the gold in your posession when many of these precious metal investments do not actually put the gold in your hands. Very easy to be scammed if the *hit hits the fan.

[catleg]

I don't really think a currency collapse is likely. Think of it this way. The Fed and Bernanke like their jobs and their power. All they have to sell is dollars. So it's unlikely they would permit so many dollars to be printed that their value would be destroyed. That doesn't mean it won't get seriously depreciated.

I've read some stuff about Weimar Germany, and it seems like when hyperinflation hits, it happens almost overnight.

Deflation is when you hoard dollars (or whatever) because you know they'll be worth more tomorrow (every defers spending as long as possible, very bad for economy) vs hyperinflation you get paid 2-3x a day and your wife comes and gets the money to spend it before its worthless.

In deflation cash is king, once it tips over to inflation you'd want hard assets, stocks would be 2nd best, cash is trash.

The problem we'll have/have already is that we'll have inflation without growth in incomes, so gradually everyone gets crushed under their debt load. Assets adjust downward in price, debt stays the same. The powers that be know this, which is why restoring the stock market is such a big deal to them.

Look at whatever the Arabs do in the middle east. Oil is effectively the world currency, and gold is the store of value. (They have deals with bullion banks to acquire gold w/o running up the price, miners borrow from the same banks using their future output as collateral/payment).

[MSbklawyer]

The only problem with buying gold and other precious metals is others must have something to barter with if the economy goes in the crapper and the dollar disappears. Then you must have the gold in your posession when many of these precious metal investments do not actually put the gold in your hands. Very easy to be scammed if the *hit hits the fan.

Yes, physical possession is a must. But I don't mean buying gold or PMs as a survivalist tool or anything like that.

What I'm thinking of is wealth preservation. If the currency does collapse or become seriously eroded; or if you go to bed one night with your life savings in cash under your mattress, then you wake up the next day to read on the news that the government has decided that all that green money with those dead white guys' pictures on it is SO 1700s and won't be accepted anymore; and now they're going to issue !New and Improved! RED currency with Obama on the Hundred Dollar Bill, Pelosi on the Fifty, Harry Reid on the Twenty and Barney Frank on the new Three Dollar Bill, then you're wiped out.

[tobee43]

What I'm thinking of is wealth preservation. If the currency does collapse or become seriously eroded; or if you go to bed one night with your life savings in cash under your mattress, then you wake up the next day to read on the news that the government has decided that all that green money with those dead white guys' pictures on it is SO 1700s and won't be accepted anymore; and now they're going to issue !New and Improved! [B]RED currency with Obama on the Hundred Dollar Bill[/B], Pelosi on the Fifty, Harry Reid on the Twenty and Barney Frank on the new Three Dollar Bill, then you're wiped out.

please....your giving me waking nightmares!!!

[backtoschool]

By "collapse" I don't mean a Weimar Germany type of collapse, where people have to carry their cash in wheel barrels to buy a loaf of bread.

I think the dollar will gradually lose it's value against other currencies like the Euro and the Yen and especially the RMB/Yuan. Since we rely on imports in this country, that will mean that everything will get more and more expensive. It won't be about buying a loaf of bread for ten thousand dollars but it will mean buying a Hyundai for $70,000, when it used to cost $20,000, etc.

The government will keep necessities such as food under artificially low prices, and eventually will try to do that with oil as well, although I think we can easily see $10 a gallon gas at some point.

Wages will not go up at the pace prices go up. There will be high unemployment. The government will not have the money to create make-work jobs because no one will want to buy our bonds in the quantity needed to fund huge stimulus projects. Taxes will have to go up to support entitlement and social security programs that will be voted for by middle class voters that need the programs in order to make ends meet.

None of this will feel like the end of the world. It will more feel like a gradual lowering of our standard of living. If you want an example of what things will look like look at the gradual decline of England in the 20th century.

[catleg]

I agree with this, except that the Euro and Yen are in bad shape too. The dynamics of the carry trade make it hard to figure which direction they're going.
There is a ton of short Yen long Euro money out there. As well as other currency pairs typically short JPY/USD/UKL and long CAD/AUD/EURO or gold.

[MSbklawyer]

I think the dollar will gradually lose it's value against other currencies like the Euro and the Yen and especially the RMB/Yuan. Since we rely on imports in this country, that will mean that everything will get more and more expensive.

Maybe ultra-expensive imports because will stimulate production here.

Taxes will have to go up to support entitlement and social security programs that will be voted for by middle class voters that need the programs in order to make ends meet.

But if taxes go up, presumably on the middle class (what's left of), won't that just have the effect of taking money out of one of his pockets (through taxation) and putting it back in his other pocket through entitlements? Minus, of course, the expense of the bureaucracy needed for sending his money around in circles like that.

None of this will feel like the end of the world. It will more feel like a gradual lowering of our standard of living. If you want an example of what things will look like look at the gradual decline of England in the 20th century.

So, in your opinion, what's the best way a person can position himself to preserve wealth and make money through that? Short the dollar? Buy precious metals? What industries, occupations or businesses are going to thrive in such a decline?