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Thread: The next bubble: CASH

  1. #1
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    Default The next bubble: CASH

    http://sovereignspeculator.com/2008/...t-bubble-cash/

    "This is deflation, a contraction of money and credit. Hardy anybody argues about that anymore. So what happens next? Will Obama and the bailout maniacs inflate a new bubble in green energy in their new, green deal? Maybe, but it would only be a limited bubble, not the worldwide craze in any and all non-dollar assets that we saw the last time around.

    Don’t assume that any new bubbles at all will form for a long, long time. The mood has shifted from risk to hoarding. Now that people have been burned by everything from dot-coms to gold miners and are scared to death of losing their jobs, they are going to hang onto the one thing that still works: Washington Wallpaper, the little notes that promise, “I owe you nothing but more of these IOUs.

    Deflation will rage, until it doesn’t. We are still early in this phase, since among the public there is still a healthy fear of the dollar and paper money in general. But over the next year, as commodities and foreign currencies slide still lower and consumer prices stay solidly and noticeably negative, people will forget about the deficit and the $100 trillion in debt at just the wrong time.

    This is the rule of maximum pain for the maximum number. The dollar is not yet ready to fail because it is too feared and despised. But when people let their guard down and sell for $450 the Krugerrands that they are paying $900 for today, take all that they have, because then the real fun will begin.

    Just as the public will get too complacent about holding I-owe-you-nothings (Doug Casey’s phrase), Congress and Obama will get too complacent about printing them up, and the whole debt-based money system will come crashing down. I don’t pretend to know how it will play out (hyperinflation or just plain-old, “sorry, we can’t pay” default), but it will be visibly ugly, and I am glad I’ll only be watching it on TV. This won’t be pretty anywhere, but the US is not a civilized country anymore, and it has a most uncivil government."

    Interesting, how this may play out...

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    Default Re: The next bubble: CASH

    ^^^ the only 'bug' in this otherwise theoretically valid position is that the US gov't, as the 'owner' of Freddie / Fannie / FHA etc., and as the holder of who knows what sort of mortgaged backed derivatives instruments via Maiden Lane or FED QE collateral, simply cannot afford ( literally ) to allow real estate prices to drop to 'free market' levels actually determined by supply and demand. This leads to the ( already partially substantiated ) conclusion that the US gov't will continue to 'inflate' both the US dollar and to provide taxpayer funded subsidies to levitate the real estate market in order to prevent a 'bloodbath'.

    Based on the modified theory, the prediction then becomes a deflation = decrease in US dollar denominated prices for just about everything that is non-essential, but an inflation = increase in US dollar denominated prices for items that ARE essential. This could indeed lead to a new bubble in food prices, energy prices, single line related items like fertilizer prices, other increasingly essential items such as gun and ammo prices, etc.

    Of course, from a US dollar centric standpoint, all of this may very well be thrown into turmoil by economic policy / situation changes originating in other countries. To wit, China is tightening bank credit and threatening to break the US dollar vs Yuan exchange rate peg ( which will make everything imported from China more expensive. The Japanese gov't just took a hit to their sovereign debt rating ( prompting carry traders to sell off their US dollad denominated assets to repay previously borrowed Yen before they are forced to eat an exchange rate loss ). And EuroLand has its own downgrade problems i.e. Greece and Spain. And the discretionary incomes of Americans is still declining due to stubborn unemployment, zero pay raises, rising taxes etc. reducing their ability to spend money on non-essential purchases. All of the above effectively reduce international demand for US dollars.

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    Default Re: The next bubble: CASH

    the US government has been stupid for a very long time they dont seem to grasp a simple economical concept that any 10 year old can tell you. You cannot spend money if you do not have money, a credit card (or borrowing) may allow you to make a purchase but at some point you have to pay back the money used

    course I dont particularly care, I have guns, I have ammo and I have a decent amount of my own land I like society but I can get by without it if it ever comes to that

  4. #4
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    Default Re: The next bubble: CASH

    Quote Originally Posted by Melonie View Post
    an inflation = increase in US dollar denominated prices for items that ARE essential. This could indeed lead to a new bubble in food prices, energy prices, single line related items like fertilizer prices, other increasingly essential items such as gun and ammo prices, etc.
    This was my understanding too. What are some things that might be financially helpful for an individual to do at this time if this prediction turns out to be correct? Other than have as little debt as possible.

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    Default Re: The next bubble: CASH

    diversify holdings into things denominated in currencies other than the US dollar / Euro / Yen. While this is 'gold foil hat' crowd stuff, the argument is being made that there will be a 'race to the bottom' among the currencies where gov'ts have run up 'unpayable' debt levels. Personally speaking, I still like the Swiss Franc. The commodity based currencies like the Canadian and Australian $ are also good options.

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