Which will come first, deflation or hyperinflation?
Deflation first, then hyperinflation
18%
[ 14 ]
Hyperinflation first, then deflation
22%
[ 17 ]
Only deflation
5%
[ 4 ]
Only hyperinflation
23%
[ 18 ]
Neither
1%
[ 1 ]
I have no idea
28%
[ 22 ]
Total Votes : 76
Author
Message
tugboat Tar Sands
Joined: Feb 05, 2006 Posts: 51
Posted: Sat Mar 17, 2007 6:25 am Post subject: Re: Which will come first, deflation or hyperinflation?
Would anyone care to summarize how they would invest $500,000 (or any $$ amount) in each of the scenarios - deflation, stagflation and hyperinflation ? For the "where to invest" challenged (myself) - sometimes the more I read - the more confused I become.
Posted: Fri Jun 06, 2008 2:31 pm Post subject: Hyperinflation or deflation - which way will it go?
Reading through many older posts on this board, I'm well-nigh dazzled with the prognostications offered here. So, I'm asking now - do you think the American currency will go to hyperinflation or deflation?
And am I right that hyperinflation is good for folks deep in debt? And who is deflation good for???
Posted: Mon Jun 09, 2008 1:09 am Post subject: Re: Which will come first, deflation or hyperinflation?
Deflation is good in the sense that it returns the price of assets back towards their fair value, however you might like to define that - historical average, price to earnings ratio, relative value, etc. - which is very good if asset prices have become too expensive relative to wages for example.
Unfortunately, the flipside of deflation is often high unemployment, slow growth and making debt more expensive and harder to repay in real terms. The goal should always be sustainable economic growth that is neither inflationary nor deflationary, but based on increases in productivity. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Thu Jun 19, 2008 2:43 am Post subject: Re: Which will come first, deflation or hyperinflation?
tugboat wrote:
Would anyone care to summarize how they would invest $500,000 (or any $$ amount) in each of the scenarios - deflation, stagflation and hyperinflation ? For the "where to invest" challenged (myself) - sometimes the more I read - the more confused I become.
If ya want my cynical answer, one thing that seems to be in demand in any market: deflation, stagflation or hyperinflation is stuff that appeals to human vice. High school many years ago is the first place I heard about "Triangular trade"
if ya have little or no morals and balls the size of Tony Montana (the scare face character), then I would think $500,000 would be more than enough money to start your own triangualr trade in "girls, drugs and guns" basic stuff like this will always be in demand.
if ya don't have the stomach for illicit activites, then I'd invest about 10k in physical money (i.e. gold coins) walking around money as they say, take 10k to buy some camping gear, hunting gear and take a few wilderness classes (never hurts to have some basic survival skills for you and your family and friends). I'd also spend about 1k each year on getting as close to possible to unbiased news (I personally get a number of old fashion news papers like the Financial times, business week, etc.). and always skim news sites like
which can be helpful for understanding the many manifistations of peakoil, and might give ya investment ideas. Then I'd spend about 25k fixing up your existing home and car to be more energy efficent.
With the last 450k left over, a majority of that I'd buy ETF's in sectors I think would be up and comming...
For example I think alternative energy is an answer to peak energy and global warming so I get a few thousand shares of GEX
personally I don't think it worth it to try and max out each investment, you'll get a heart attack if did trying to keep track of all the little details, instead look at the big "strategic" picture. Individual stocks like "fslr" or "first solar" can make an individual trader lots of money, but too often traders make a "small fortune" when they started off with a "big fortune" so unless you're prepared to loose (which is a very distinct possibility), still with less volatile ETF instead of individual stocks. _________________ "I'm 100% sure that unsustainable conspicuous consumption of natural basic resources will eventually lead to a proverbial hell on earth for those people who get stuck with the mismanagement mess of mankind not being stewards of the environment!"
Posted: Fri Jun 20, 2008 12:15 am Post subject: Re: Which will come first, deflation or hyperinflation?
I think we'll have both at the same time. We already do now but in a much smaller scale than it will be.
We can see deflation in the price of homes, businesses, large vehicles, construction equipment, job losses and many stocks and an increasing number of bonds.
On the inflation side we have gas, electricity, food, clothing, insurance (driven up by disasters), etc.
For the future, I think we (US in particular) are going to have a systemic collapse. Bernanke has admitted that he had to rescue Bear Sterns to prevent systemic collapse. The investment banks and commercial banks are all tied together so the fall of a critical domino bank can take out almost the whole set.
There are so many possibilities that can trigger the collapse, it is quite scary. The following is a more complete list of dominoes I see.
End of the petro-dollar (more oil exporters won't accept the dollar)
Loss of faith in the dollar (those holding mega dollars such as oil exporters and China start trading them for other currencies in a panic)
Loss of faith in the US Treasuries (similar to the dollar above, the US has been spending more than it produces for years, would you loan to someone like that?)
Large bank failure
Large investment bank failure
Even more massive residential foreclosures (they have been accelerating at a high rate)
Many commercial foreclosures
Stock market crash
Bond market crash
Massive credit card defaults
Sharply higher oil prices
Fuel shortages
Electricity black outs
Inability to obtain loans (mortgage, credit card, student loans, business loans)
Large business failures
Even more climate change disasters (floods, hurricanes, fires, drought, etc.)
Collapse of the derivatives (said to be hundreds of trillions of dollars, more than the value of most everything on Earth)
I think many of these will happen all at once, feeding upon one another. You can find data and excellent references for most all of this in Housing & Financial Collapse Thread
Imagine, the banks collapse, your money in the bank is gone (the FDIC has less than 1.2% of reserves for what it insures), businesses have lost their money in the bank as well. Businesses have no money to pay their employees so employees stop working (deflationary). The Fed and Treasury will start creating massive amounts of money (electronic and physical), because they are broke already, to try to get things going again (inflationary). As the dollar rapidly loses value, oil exporters, China, India, etc. will refuse to accept the dollar and will dump their Treasuries (inflationary). Suddenly, the US imports will be limited to our exports causing an immediate and drastic oil and natural gas shortage. Things we no longer manufacture in the US will skyrocket in price or will be totally unavailable.
I could go on and on linking in all of the other items in my list.
Looking at the above, it appears to be mostly inflationary, but the huge size of the derivatives means their collapse will take a lot of money out of this world.
These pains will be felt all over the world, I just think it will be worse for the US because we are so fossil fuel dependent.
Joined: Jun 14, 2008 Posts: 81 Location: With one foot in ascent and the other in descent
Posted: Fri Jun 20, 2008 12:57 am Post subject: Re: Which will come first, deflation or hyperinflation?
mattduke wrote:
And to think I thought the inflation/deflation debate was settled years ago....
Yes, I sure thought we were done with this one. Anyone who thinks we've been going through deflation anytime in the past three decades in the US, or that we are going through deflation now, is smoking something that I'd like to take part in. We've been inflating the money supply steadily, and now with the bank bailouts and contractions of the economy, we are in stagflation with ramping inflation of the money supply. At some point it will all come to a crashing halt, and we will enter a deflationary depression, but probably not before we have sampled the delights of hyperinflation, courtesy of the Federal Reserve. _________________ Because it's all about the oil.
Joined: Aug 03, 2007 Posts: 3804 Location: Boston Suburbs
Posted: Fri Jun 20, 2008 1:09 am Post subject: Re: Which will come first, deflation or hyperinflation?
I'm with Revi on this. Anything you pay for other than homes and SUVs are going to get more expensive by virtue of the tumble of the dollar and the rise in oil. I expect a glut in used items as people sell everything they've got to keep their head above water. But new stuff will get more expensive. Some items have resisted that upward pressure for some time, though. Like look at the new $200 IPhone or the EEE PC and derivatives. High tech is unique in the way it's been able to consistently cost reduce. How much longer it will be able to carry that on, I don't know. _________________ Paranoia is demonstrated to be an infectious disease, and stupidity plus the internet its major vector.
Posted: Fri Jun 20, 2008 3:11 am Post subject: Re: Which will come first, deflation or hyperinflation?
mattduke wrote:
I confess I have no idea where you guys are getting the idea that we are going to have deflation. Once the dollar goes to zero, it ain't coming back.
You like Mises, right? He defines money as that which is most liquid and therefore used for trade, and hoarded as a means of saving for the future. Therefore, deflation of one asset can occur relative to another asset. No asset has an absolute value. Only a relative value against other assets. That is why we can see deflation and inflation at the same time regardless of in what form of money we measure it with. Wages are being deflated against the value of energy and commodities as we speak. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Fri Jun 20, 2008 7:41 am Post subject: Re: Which will come first, deflation or hyperinflation?
MrBill wrote:
mattduke wrote:
I confess I have no idea where you guys are getting the idea that we are going to have deflation. Once the dollar goes to zero, it ain't coming back.
You like Mises, right? He defines money as that which is most liquid and therefore used for trade, and hoarded as a means of saving for the future. Therefore, deflation of one asset can occur relative to another asset. No asset has an absolute value. Only a relative value against other assets. That is why we can see deflation and inflation at the same time regardless of in what form of money we measure it with. Wages are being deflated against the value of energy and commodities as we speak.
Well I can tell you haven't read any Austrian economics, otherwise you would know deflation is a contraction of the money supply. Relative prices are just market data. Heck, even Benedict Bernanke will tell you that "inflation is a monetary phenomenon". Duh. I'm always surprised when people fail to grok that prices react unevenly to inflation, not every price goes up (although some prices that went down would have gone down even more without inflation (roaring twenties)). No, I take it back. I'm not surprised anymore. All you deflationistas please, buy long term treasuries, the RISKLESS investment!
Posted: Fri Jun 20, 2008 8:36 am Post subject: Re: Which will come first, deflation or hyperinflation?
Quote:
MONEY IS NOT A MEASURE OF VALUE
Money transmits value, Mises taught, but money does not measure value. This distinction is fundamental in Mises's theory of money."Money is neither an abstract numeraire nor a standard of value or prices. It is necessarily an economic good and as such it is valued and appraised on its own merits, i.e., the services which a man expects from holding cash. On the market there is [sic] always change and movement. Only because there are fluctuations is there money" (Human Action, p. 418).
Any economic theory that teaches that money measures economic value, or that any civil government should establish policies that preserve the value of money because money is a measure of value, is anti-Misesian. You must understand this conclusion if the remainder of this study is to make any sense at all. The call for government-induced stable purchasing power, with or without a government-licensed monopolistic central bank, is an anti-Misesian call for government intervention into the economy. Mises was opposed to government intervention into the economy, including the monetary system.
Mises was adamant: there is no measure of economic value. He was a disciple of Carl Menger. Menger was a proponent of a strictly subjective theory of economic value. Mises insisted that there is no objective way to measure subjective value. He began Chapter 2, "On the Measurement of Value," with these words: "Although it is usual to speak of money as a measure of value and prices, the notion is entirely fallacious. So long as the subjective theory of value is accepted, this question of measurement cannot arise" (TM&C, p. 3. Subjective valuation "arranges commodities in order of their significance; it does not measure its significance" (p. 39). It ranks significance; it does not measure it. This is the theme of Chapter 2.
If it is impossible to measure subjective use-value, it follows directly that it is impracticable to ascribe 'quantity' to it. We may say, the value of this commodity is greater than the value of that; but it is not permissible for us to assert, this commodity is worth so much. Such a way of speaking necessarily implies a definite unit. It really amounts to stating how many times a given unit is contained in the quantity to be defined. But this kind of calculation is quite inapplicable to processes of valuation (p. 45).
The fact that money does not measure value is a crucially important aspect of Mises's theory of money. Perhaps this analogy will help clarify his reasoning.
source: Mises on Money _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Joined: Aug 03, 2007 Posts: 3804 Location: Boston Suburbs
Posted: Fri Jun 20, 2008 4:07 pm Post subject: Re: Which will come first, deflation or hyperinflation?
tugboat wrote:
Would anyone care to summarize how they would invest $500,000 (or any $$ amount) in each of the scenarios - deflation, stagflation and hyperinflation ? For the "where to invest" challenged (myself) - sometimes the more I read - the more confused I become.
Posted: Fri Jul 04, 2008 2:57 am Post subject: Re: Which will come first, deflation or hyperinflation?
Quote:
World stocks slipped back towards this week's five-month low on Friday as oil prices near record highs kept inflation concerns alive a day after the European Central Bank raised interest rates.
The euro failed to benefit much from the ECB's quarter point rate hike on Thursday and the region's government bonds rose as President Jean-Claude Trichet said he had no bias on monetary policy, dousing speculation about aggressive rate hikes this year.
A less hawkish tone from Trichet, followed by U.S. job data which came in line with expectations, provided only short-term solace for equity investors.
"We cannot get any big relief as long as the overall stagflation fears hang over the market, and the oil price is a major factor in this. There will be a wave of downward pressure on equities after any recovery," Gerhard Schwarz, head of global equity strategy at UniCredit in Munich, Germany.
"The big question on equity markets is: how far will the derating go, and when will valuations find a bottom as we consider inflationary pressures not seen in two and a half decades?"
Analysts say emerging markets, especially in Asia, will be more severely hit by the rising energy costs.
"The monumental energy price increases will be a ‘game-changer' for Asia, in our view," said Stephen Jen, head of global currency research at Morgan Stanley.
"While there is some scope for remedial policy action to ‘amortize' this shock, Asia ex-Japan currencies will likely weaken against the dollar and assets should underperform in the period ahead."
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. Subjective valuation 
