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Author Topic: Worst Case Scenario: The Coming Hyperinflation
Pyrtolin
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quote:
Originally posted by Kuato:
This is when I really wonder if people listen to what they are saying.

a bidding war....

..... causing prices to rise....

100 people bidding for 10 loaves of bread will definitely cause prices to rise. Daruma's claim is, basically, that we don't have the capacity to make 100 dollars of bread.

It's consistent, if you accept that premise.

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Kuato
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oh. ok. well, if we don't have goods and services to sell coming out our ears and hawked from the streets.....shoot me.

[ April 17, 2009, 12:43 PM: Message edited by: Kuato ]

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kenmeer livermaile
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...with a pottery cannon.
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Daruma28
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quote:
Originally posted by Pyrtolin:
quote:
Originally posted by Kuato:
This is when I really wonder if people listen to what they are saying.

a bidding war....

..... causing prices to rise....

100 people bidding for 10 loaves of bread will definitely cause prices to rise. Daruma's claim is, basically, that we don't have the capacity to make 100 dollars of bread.

It's consistent, if you accept that premise.

NO, that is NOT my claim.

I'm claiming that this "stimulus" is going to cause hyperinflation.

It's not that we won't have the capacity, it's that the currency is going to crash so quickly, EVERYONE will be unable to conduct normal economic activity, because they won't be able to negotiate terms for the purchase of raw material, the wages for labor, the cost of capital and the prices to charge end-user consumers, because of how quickly the purchasing power will be destroyed by hyperinflation.

It's not as if I'm referring to some mythical hypothetical.

Hyperinflation is a very real phenomenon that has occurred numerous times throughout history...and it's coming to us, real soon.

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Pyrtolin
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quote:
Originally posted by Daruma28:
quote:
Originally posted by Pyrtolin:
quote:
Originally posted by Kuato:
This is when I really wonder if people listen to what they are saying.

a bidding war....

..... causing prices to rise....

100 people bidding for 10 loaves of bread will definitely cause prices to rise. Daruma's claim is, basically, that we don't have the capacity to make 100 dollars of bread.

It's consistent, if you accept that premise.

NO, that is NOT my claim.

I'm claiming that this "stimulus" is going to cause hyperinflation.

It's not that we won't have the capacity, it's that the currency is going to crash so quickly, EVERYONE will be unable to conduct normal economic activity, because they won't be able to negotiate terms for the purchase of raw material, the wages for labor, the cost of capital and the prices to charge end-user consumers, because of how quickly the purchasing power will be destroyed by hyperinflation.

It's not as if I'm referring to some mythical hypothetical.

Hyperinflation is a very real phenomenon that has occurred numerous times throughout history...and it's coming to us, real soon.

Hyperinflation isn't a magical force- its a result of supply and demand; specifically demand suddenly exceeding supply by a vast amount. For it to happen, supplies have to be limited enough that buyers bid up prices. If no bidding gets around to happening because of sufficient supply, then prices don't change.

Hyperinflation has happened, yes, but only in economies where there was no production capacity to match the sudden flood of cash, because it was destroyed in war or because it had not yet been built. If your primary industry is sustenance farming, tons of cash will cause hyperinflation because money doesn't grow crops any faster. But if you've got warehouses full of overstocked goods and idle factories and factory workers, tons of cash just is soaked up by getting them all moving again and doesn't have a chance to bid up prices, it just drives production.

If you have 10 dollars and 10 loaves of bread, prices are the same as if you have 100 dollars and 100 loaves of bread. Hyperinflation only happens if you have 100 dollars but only 10 loaves of bread. (And deflation happens if you have 10 dollars and 100 loaves of bread- especially if the store refuses to sell them for $.10 because they cost $.75 to make)

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Pyrtolin
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quote:
Originally posted by Daruma28:
It's not that we won't have the capacity, it's that the currency is going to crash so quickly, EVERYONE will be unable to conduct normal economic activity, because they won't be able to negotiate terms for the purchase of raw material, the wages for labor, the cost of capital and the prices to charge end-user consumers, because of how quickly the purchasing power will be destroyed by hyperinflation.

Actually, in one way, our currency will change- it will be worth less when compared to other currencies. This won't affect domestic prices much at all; it will make the cost of importing relatively higher, though, and make our good more competitive on exports; it will become less cost effective to send jobs over seas than it is to keep them here and we'll see a higher demand for what we do produce across the board.
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Kuato
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quote:
Originally posted by kenmeer livermaile:
...with a pottery cannon.

zinnnnnnnnnnnnnggggggggg!
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Daruma28
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quote:
If you have 10 dollars and 10 loaves of bread, prices are the same as if you have 100 dollars and 100 loaves of bread. Hyperinflation only happens if you have 100 dollars but only 10 loaves of bread.
Or...

If you have 262 billion dollars in domestic circulation, and in a manner of less than a year, you increase it to 3818 billion dollars.

[Exploding]

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Kuato
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or, alternately, you didn't, but you have a lot of people screaming that you did.
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Pyrtolin
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quote:
Originally posted by Daruma28:
quote:
If you have 10 dollars and 10 loaves of bread, prices are the same as if you have 100 dollars and 100 loaves of bread. Hyperinflation only happens if you have 100 dollars but only 10 loaves of bread.
Or...

If you have 262 billion dollars in domestic circulation, and in a manner of less than a year, you increase it to 3818 billion dollars.

How? Where's the shortage of bread? Our GDP could eat that for breakfast and still be famished.

[ April 18, 2009, 12:09 AM: Message edited by: Pyrtolin ]

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IrishTD
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quote:
Actually, in one way, our currency will change- it will be worth less when compared to other currencies. This won't affect domestic prices much at all; it will make the cost of importing relatively higher, though, and make our good more competitive on exports; it will become less cost effective to send jobs over seas than it is to keep them here and we'll see a higher demand for what we do produce across the board.
(in response to bold part): As long as you don't need to import raw material sure. However, oil is a dollar-based commodity -- cost will go through the roof as the dollar is weakened. Oh, and you can forget overseas travel.
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Pyrtolin
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quote:
Originally posted by IrishTD:
quote:
Actually, in one way, our currency will change- it will be worth less when compared to other currencies. This won't affect domestic prices much at all; it will make the cost of importing relatively higher, though, and make our good more competitive on exports; it will become less cost effective to send jobs over seas than it is to keep them here and we'll see a higher demand for what we do produce across the board.
(in response to bold part): As long as you don't need to import raw material sure. However, oil is a dollar-based commodity -- cost will go through the roof as the dollar is weakened. Oh, and you can forget overseas travel.
No- as you say, it's a dollar based commodity. As long as that's true, then the price won't be directly affected.

It will push demand up a bit because oil will now be more affordable in other currencies, but, really, that's part of why it's important that a large portion of the funding goes into getting oil alternatives fully online so that it no longer serves as a externality that can be manipulated to damage our economy.

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Daruma28
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Pyrtolin, keep denying the reality that is apparent to anyone that can study up the history of hyper-inflation and the role of printing fiat currency has had in creating it (and how Obama and the Fed are doing it all over again).

More and more people are starting to wake up to the threat...

From today's Washington Examiner

quote:

Get ready for Obama’s coming hyperinflation
By: Examiner Editorial
-
04/30/09 4:50 AM
Those who refuse to learn from history are doomed to repeat it, said George Santayana, the philosopher. But this familiar maxim is being ignored this week by President Barack Obama and his fellow Democrats on Capitol Hill this week as they complete action on the chief executive’s proposed 2010 federal budget. With its unprecedented deficit approaching $2 trillion, this budget proposal is a certain prescription for hyper-inflation. So every senator and representative who votes for this monster $3.6 trillion budget will be endorsing actions that will turn America into the next Weimar Republic. For those too young to remember, that was the period in Germany in the years between the two world wars when people needed wheelbarrows full of money to buy a loaf of bread.

In a 1993 interview, Harvard law professor Friedrich Kessler described what living with Weimar hyperinflation was like: “It was horrible. Horrible! Like lightning it struck. No one was prepared....The shelves in the grocery store were empty. You could buy nothing with your paper money.” Thanks to the expanding profligacy on Capitol Hill, a version of such economic hell will likely happen here, according to two prominent economists. Johns Hopkins Professor Steve Hanke notes that the Federal Reserve’s balance sheet “has more than doubled in size since August...Unless the Fed shrinks its balance sheet,” he warns, “...inflation will roar back with a vengeance.”

The printing presses have already been running non-stop since Congress approved the Toxic Assets Recovery Program (TARP) and the $787 billion bailout of insolvent firms who got that way by abusing “easy credit.” Yet with interest rates now close to zero, Hanke points out, the Fed is merely “prescribing more of the same.” In their groundbreaking “Monetary History of the United States” Anna Schwartz and the late Nobel Prize winner Milton Friedman found that then (as now) a huge influx of foreign capital accompanied the early stages of Weimar hyperinflation. Schwartz, who today believes the “systemic risk” cited as justification to recapitalize failed financial institutions was just an excuse to save bankers’ hides, agrees that massive inflation is “unavoidable.”

There have been other, more recent hyperinflations, too. After years of deficits, the former Yugoslavia tried to print its way out of a similar predicament, then tried to counter the inevitable 15 to 25 percent annual inflation rate with price controls. Economic collapse quickly followed the worst hyperinflation in history. On Nov. 12, 1993, one million dinars could be traded for one German deutsche mark; by Jan. 4, 1994, the exchange rate was 6 trillion to 1. With Obama’s reckless 2010 budget – which was passed without a single Republican vote - Democrats are playing with inflationary fire.

While we disagree vehemently on so many things...I still say to you Pyrtolin, and Kuato and any other Demolib that thinks I'm full of it and that Obama is doing the right thing to "fix" the economy...

...you should still take precautions to ensure that you have the basic necessities of life stored up in preparation in case I am in fact right. If I am correct in predicting that Obama/the Fed/Democrats in congress are in fact creating the conditions for hyper-inflation, you will quickly find out how our JIT inventoried grocery stores will no longer have food for you and your family to eat.

If you are right and I'm wrong...goody goody, at least you will still have the supplies to whether any kind of natural disaster like Hurricane Katrina.

Prepare for the worst, hope for the best.

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kenmeer livermaile
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D: saying it's so don't make it so. This is coming to you from the guy who tells people they're wrong and that's that: AFTER the topic has been sussed a zillion times.

BTW, I am working very hard to stock up and taking other measures as well. You'd dig it, and we'd make great survival/bizzness partners if we lived in the same vicinity.

I will send pics down the road if it works aS PLANNED. (DANG caps KEY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!)

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cherrypoptart
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So if you believe this is going to happen, what should you do?

Buy Euros and yen?

Gold?

Not everything mind you, just diversify the portfolio like it probably should have been all along.

And I'm not giving advice, just asking...

Also, what's the first sign? When might we expect it? And once you see it, is it already too late?

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kenmeer livermaile
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Try thinking outside of monetary terms, for starters.
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Daruma28
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quote:
Originally posted by cherrypoptart:
So if you believe this is going to happen, what should you do?

Buy Euros and yen?

Gold?

Not everything mind you, just diversify the portfolio like it probably should have been all along.

And I'm not giving advice, just asking...

Also, what's the first sign? When might we expect it? And once you see it, is it already too late?

Guns, Gold & Groceries. [Cool]

I've got the guns and the groceries part so far...can't afford the gold.

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Pyrtolin
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Do note how the two countries cited in the article were not only ones with collapsed infrastructure but ones that used the money to pay off creditors rather than paying people to improve said infrastructure.

Of course you're going to see hyperinflation if you print money, but then don't use it to drive economic growth.

quote:
Originally posted by Daruma28:
...you should still take precautions to ensure that you have the basic necessities of life stored up in preparation in case I am in fact right. If I am correct in predicting that Obama/the Fed/Democrats in congress are in fact creating the conditions for hyper-inflation, you will quickly find out how our JIT inventoried grocery stores will no longer have food for you and your family to eat.

Show me a significant looming shortage of crops and you'll have a point. Are you seriously saying that we can't produce enough food to feed every person in the US? That's simply untrue.

Our farm production capacity far exceeds the maximum demand we could put on it at the moment. Farmers and stores will make record profits, but there's no danger of scarcity because we can grow it faster than we can eat it. Same goes for clothing. Textile plants are closing because current demand doesn't meet production capacity. We'd have to fill and exceed that capacity faster than we could build new plants to see significant inflation.

Can you point to even one production sector that isn't intentionally restricted to create scarcity that would have trouble keeping up?

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Daruma28
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Pyrtolin, where do I say the US will not have the production capacity to meet demand?

The problem will be the collapse in currency...as seen in other historical examples.

When Hyper-inflation kicks in, people watch as prices for goods and services rise dramatically over a short period of time. When a loaf of bread costs 2.00 today, 3.00 dollars tomorrow, 6.00 the day after, 12.00 the day after...so on and so forth, people take as much money as they can and go out and buy up as much as they can once they realize that 100 today will only be able to buy half as much tomorrow because the hyper inflation continues to devalue the dollar by exponentially declining purchasing power.

Almost all grocery stores across the country now rely on Just In Time delivery systems.

So if hyperinflation does in fact occur, you will be seeing grocery stores with emptied shelves.

Hyper inflation will literally create a situation that will make demand severely outstrip supply in a short period of time.

THAT is what I'm talking about.

Hyper inflation destroys your purchasing power quickly.

But hey...don't worry about it. I'm sure you're confident Obama's gonna take care of everything!

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Pyrtolin
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quote:
Originally posted by cherrypoptart:
So if you believe this is going to happen, what should you do?

Buy Euros and yen?

Gold?

Not everything mind you, just diversify the portfolio like it probably should have been all along.

Food (especially seeds that are suited to your climate), medical supplies, tools, and fuel.

Don't bother with gold- if there's a collapse no one is going to give a hoot about it because it has no intrinsic value outside of the high tech and advanced medical fields.

More importantly work on developing a few essential skills that you can barter the exercise of. Supplies can run low, supplies can be found, but practical knowledge will be the most valuable thing going.

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Pyrtolin
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quote:
Originally posted by Daruma28:
Pyrtolin, where do I say the US will not have the production capacity to meet demand?

The problem will be the collapse in currency...as seen in other historical examples.

When Hyper-inflation kicks in, people watch as prices for goods and services rise dramatically over a short period of time. When a loaf of bread costs 2.00 today, 3.00 dollars tomorrow, 6.00 the day after, 12.00 the day after...so on and so forth, people take as much money as they can and go out and buy up as much as they can once they realize that 100 today will only be able to buy half as much tomorrow because the hyper inflation continues to devalue the dollar by exponentially declining purchasing power.

Almost all grocery stores across the country now rely on Just In Time delivery systems.

So if hyperinflation does in fact occur, you will be seeing grocery stores with emptied shelves.

Hyper inflation will literally create a situation that will make demand severely outstrip supply in a short period of time.

THAT is what I'm talking about.

Hyper inflation destroys your purchasing power quickly.

But hey...don't worry about it. I'm sure you're confident Obama's gonna take care of everything!

Hyperinflation doesn't happen because of magical fairies. It happens because supplies fall short of demand so people with extra cash bid the prices up trying to win a share of what supply is left.

If there are no shortages, prices won't magically rise on their own. The shortage comes first, then the inflation.

Your point about Just In Time delivery only makes sense if you, overnight and without warning, hand every person who currently can't afford as much food as they need a huge amount of money and they all go out and stockpile at once. Because the other side if JIT is that it accounts for demand increases by increasing orders. When stores see business pick up, they'll pick up the pace of inventory, and since they're getting regular JIT deliveries rather than trying to stock several weeks or months in advance, supplies will rise at pace with demand.

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Daruma28
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No Pyrt, hyperinflation will occur when the Fed starts releasing all of the fiat currency they've been printing like crazy. When the money supply gets inflated to 15 times it's original amount in circulation, that's when the prices will rise quickly.

But hey, as I said before...if I'm wrong, and you go out and stock up on food, supplies, etc....you will still have all of that in case of any other kind of emergency that could see the same effect.

It was only a couple of years ago when Hawaii had a minor earthquake that shut down the entire island's power for 24 hours...I watched as within of 10 hours, most of the stores shelves in my town had been emptied by lines of people worried because we did not know how long the power would be off.

If you're wrong, and you didn't prepare for the possibility of Hyperinflation's worst effects...you'll be like the hundreds of thousands of other people caught unprepared.

I'm no mormon, but I do know that the one teaching of that church that I think is infallible, is their belief in food storage for emergency preparedness.

You can theorize all you want, and point out the differences between Obama/the Fed's actions and the Wiemar republic and other countries that have experienced hyperinflation...the results are never pretty. Better to buy your can of spam now when it is only 3.00 instead of after hyperinflation and someone is selling it for $300.

Oh, as for Gold...just look at the price of Gold today. And compare that to what it was even one year ago.

Should the hyperinflation crash happen, gold will be REAL money when the dollar is rendered completely worthless.

Gold is the one commodity that has value in every single nation around the world.

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kenmeer livermaile
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If hyperinflation occurs enough to seriously affect food supplies, the prevailing currency will be the most popular forms of ammo.

Beyond that, barter of life-sustaining materials.

Gold? Only for those who already have life-sustaining materials.

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Kuato
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or,

as an alternative to panicking, you consider that we have been injecting liquidity all along, since the Civil War, but in insufficient amounts to balance production, and that perhaps balancing production will balance the commerce......

or you never know, equitable conditions just might just destroy everything, that's true.

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cherrypoptart
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> Pyrtolin


> Food (especially seeds that are suited to your climate), medical supplies, tools, and fuel.

I hope Daruma isn't talking about things going that far. I wouldn't even know what to do with all that stuff. There's no way that's going to help anyone living in the big city. No good way to store fuel either. If hyperinflation hits, the first thing to go through the roof will probably be gas too. This could really suck.

Don't worry though. I'm sure Obama has a plan.

On second thought, that's what does worry me...

> Daruma28

> Guns, Gold & Groceries.

Don't forget the bullets. In fact, I hear there is a shortage of bullets already in some places. People are buying them up and hording them. Not just to shoot either, though there is that. When un-numbered bullets are made illegal, they'll sell these ones on the black market I guess.


> kenmeer livermaile

> Try thinking outside of monetary terms, for starters.

That's not going to work. I'm not really set up right now to handle that reality. If it comes to that, we've failed. I've got about 40,000 in gold; too bad it's World of Warcraft gold...

If this really happens though, and there's no real reason to think it won't because it's all happened before, not sure what's going to happen. Well, at least any money anyone lost in the stock market won't matter anymore. Always look on the bright side of life.

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Pyrtolin
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quote:
Originally posted by Daruma28:
No Pyrt, hyperinflation will occur when the Fed starts releasing all of the fiat currency they've been printing like crazy. When the money supply gets inflated to 15 times it's original amount in circulation, that's when the prices will rise quickly.

Why? Penny Pixies? What will cause the prices to rise? You keep making an unsubstantiated claim here. Where will supply and demand change significantly enough to force a rise in prices? Aside from more people buying more products, what's going to change to cause this inflation. Can you show any kind of model beyond simple assertion that justifies the claim?

quote:
It was only a couple of years ago when Hawaii had a minor earthquake that shut down the entire island's power for 24 hours...I watched as within of 10 hours, most of the stores shelves in my town had been emptied by lines of people worried because we did not know how long the power would be off.
Indeed- that's what happens in panics or in supply shortages. Here in Pittsburgh when they call for a snow storm, stores run out of milk and bread by the time the weather report is done.

But that's got nothing to do with the price of tea in China. People aren't going to go buying up huge stockpiles of food just because they can- some panic element has to set them off first. A shortage, a disaster, something. If not, they'll buy what they'd normally want and spend their rest on their other needs, bills, or what have you.

If there's no shortage, the bidding war never starts.

quote:
Oh, as for Gold...just look at the price of Gold today. And compare that to what it was even one year ago.

Should the hyperinflation crash happen, gold will be REAL money when the dollar is rendered completely worthless.

Gold is the one commodity that has value in every single nation around the world.

In a crash value is based on utility, not aesthetics. You can't eat gold, you can't drink gold, you can't keep warm with gold. It'll have a bit of sentimental value, but no one who actually wants to survive is going to care about it. It only had historical value because of its aesthetic desirability and relative rarity. It'll be useless for barter, though, because it has no inherent value outside of a few industrial applications. In a barter economy, it's worthless.
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Daruma28
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quote:
Why? Penny Pixies? What will cause the prices to rise? You keep making an unsubstantiated claim here.
Unsubstantiated? No...only that you refuse to accept the argument has any validity. Read the initial article of this thread. Hyperinflations can occur when the money supply is exponentially boosted by fiat currency printing and interest rates are held really low.

Just because you're a true believer in hope and change, and you think Kuato is correct that this the economy will be "saved" and hyperinflation is a mythical boogeyman doesn't mean the claim is unsubstantiated.

The substantiation is the historical reference to past incidents of hyperinflation.

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cherrypoptart
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Gold will still be valuable because you can always take it to another country that hasn't collapsed its currency and start over. The whole world isn't going to go to a barter economy even if America did. In fact, I could see Americans trading in other currencies just like countries with hyperinflation conduct their business in U.S. dollars because of its stability.

Whatever level the hyperinflation rises to, gold will keep pace. If there is going to be hyperinflation, gold is one way to hedge. Of course if there is a nuclear war and we live in some sort of post-apocalyptic world, gold might not have the same value. But that's not necessarily what hyperinflation does. It just devalues a currency, not our very humanity.

I hope.

---------------------------------------

There could be hyperinflation without an end to life as we know it. Things eventually just stabilize at a mugh higher currency level. Just like they do in Japan, we'll just start printing bills in denominations of 10,000 and 100,000, except of course those represtent yen, or basically pennies, whereas ours will be for actual dollars. After a while, you get used to it.

The people really hurt will be those living on interest now. With municipal bonds. Who didn't sell when they could. Instead of making 1-2% above inflation levels, they will see the value of their portfolios decreased by who knows how much. As I said before, this is Obama's way of taking the money from the rich without even touching it. Just print enough to make it worth less (not worthless, just worth less). In his book, that's working toward achieving social justice and economic equality.

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kenmeer livermaile
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If we have hyperinflation on the feared scale, going elsewhere won;t help much.

World is already running short on food.

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Pyrtolin
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quote:
Originally posted by Daruma28:
quote:
Why? Penny Pixies? What will cause the prices to rise? You keep making an unsubstantiated claim here.
Unsubstantiated? No...only that you refuse to accept the argument has any validity. Read the initial article of this thread. Hyperinflations can occur when the money supply is exponentially boosted by fiat currency printing and interest rates are held really low.

But why does that happen? It happens because it causes demand to outstrip production, not because of some magical independent effect.

There are few products for which demand is infinitely elastic. If you can produce enough of that product to exceed the maximum demand, then it's impossible to inflate the price because someone else can undersell you.

If not supply and demand, then by what mechanism are you saying that prices will rise?

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cherrypoptart
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I just did a cursory search and didn't come up with anything, so was just wondering if Obama, the White House, Gibbs, or anyone really pushing this budget and spending have said anything meaningful about their assessment of the inflation risk and what their plans are regarding it. I see a lot of critics pointing out this real possibility, but I don't see any response to it.

We know why Kuato doesn't think there will be inflation, because the money is finally being printed to match it up with our production, but I haven't heard any of our politicians use that rationale.

So what's their rhyme and reason?

Did someone in the press already ask him about this? Did he answer? Did I miss it?

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kenmeer livermaile
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A wise politician rarely speaks the functional truth unless the public is fully convinced of it.

It's similar to the attorney rule whereby an attorney never asks a witness on the stand a question whose answer the attorney doesn't know.

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kenmeer livermaile
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"t happens because it causes demand to outstrip production, not because of some magical independent effect."

You, sir, are a serious seance party-pooper.

Gimme back my magic!

'Oh spirits of financial consequence! If ye are present, rap with thine Invisible Hand!'

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Kuato
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*giggling*
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Daruma28
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quote:
If not supply and demand, then by what mechanism are you saying that prices will rise?
Of course it's supply and demand.

IN short: The Fed/Obama are set to exponentially expand the supply of money...by 15 times the current circulation.

Kuato is trying to say that demand will be more than capable of meeting this rapid expansion of supply.

I say bull****. The history of hyperinflation has been written time and time again.

Nevertheless, all of the Austrian economists are predicting hyperinflation by the end of this year (provided the stimulus money is put into circulation and we don't have a dramatic world event that changes things).

We'll see soon enough about who was right and who was drunk on the kool-aid of partisan propaganda.

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Kuato
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quote:
Kuato is trying to say that demand will be more than capable of meeting this rapid expansion of supply. -daruma
No, I'm saying that production or in other words, available "supply" is ALREADY there (we all have goods and services we wish to be selling to each other) to absorb it, not "demand" as though we were already buying it.

Do I walk all over buying stuff (that is what creates the statistic we call "demand") that I can't afford? I tend to think most Americans are the same. This is the difference between demand and market. The market is there, ready and willing, but cannot transact (pay) in order to show a demand for the production of the good/service. So, is the production made technically worthless by lack of capital? yep.

But give em money, they'll "demand" and "demand" until their cars, homes, bodies, clothing, businesses and bicycles are repaired and back in working order. Braces, chiropractors, doctors, health clubs, singing lessons, road-side tomatoes, fence painting, face painting, birthday party clowns, college pizza parties, prostitution, drugs, poker, condoms, and school supplies in general...

If you had 15x the money you had today, Daruma, do you think that you would a way to spend it?

[ May 01, 2009, 06:45 PM: Message edited by: Kuato ]

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LoverOfJoy
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Well, if everyone's incomes go up 15 times what they currently are, one thing is for sure. We'll be back to having to resort to buying wiis off ebay for X times the retail price. [Wink] At least for a year or two until they ramp up production enough.
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Kuato
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There is no way 15x is enough, and they're going to eventually realize it.
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Daruma28
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quote:
Originally posted by Kuato:
[QB]
quote:
Kuato is trying to say that demand will be more than capable of meeting this rapid expansion of supply. -daruma
No, I'm saying that production or in other words, available "supply" is ALREADY there (we all have goods and services we wish to be selling to each other) to absorb it, not "demand" as though we were already buying it.

Do I walk all over buying stuff (that is what creates the statistic we call "demand") that I can't afford? I tend to think most Americans are the same. This is the difference between demand and market. The market is there, ready and willing, but cannot transact (pay) in order to show a demand for the production of the good/service. So, is the production made technically worthless by lack of capital? yep.

This is where you're argument gets off track. A market is demand driven. No demand, no market. You're confusing that with 'capital' or money to pay for meeting the demand. Your argument is based on this idea that money is an artificial construct that can be created arbitrarily.

Money is an artificial construct...yes, but it has to represent something real. By printing it out of thin air, you devalue the current money already in circulation.

quote:
But give em money,
How do you "give" money to people? Money has to be earned - it has to represent the value of labor and/or goods. Just "giving" it will simply cause inflation, as everyone has more of the same.

quote:
If you had 15x the money you had today, Daruma, do you think that you would a way to spend it?
In one individual case...of course the stimulation will work for me.

Give EVERYONE 15x the money, and suddenly the $1.00 commodity will now cost $15.00.

In effect, kuato, are you arguing that all the goods and services in this economy are simply over priced...because people don't have enough money to pay for them? Just give 'em the money and suddenly everything will be fine again?

Have you even bothered to read up on the history of inflation and hyper-inflation? That in fact the policies you propose are the exact means of creating those devastating conditions? You can't inflate the money supply and expect the economy to just right itself.

The problem with this economy is that most Americans got accustomed to a lifestyle of consumption based on CREDIT.

The **** has hit the fan, and people and businesses are realizing that the credit bill for living beyond our means has come due...now it's time tighten our belts and start living within our means again.

The "stimulus" represents pumping all that money into the economy to stimulate lending again - i.e. to re-inflate the credit bubble by injecting more credit!

This is akin to paying my loan payments with my credit card cash advances!

[DOH]

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RickyB
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"It only had historical value because of its aesthetic desirability and relative rarity."

There's more. Also because it's a noble metal. It can't be mixed. Or couldn't with pre-modern tech. Also doesn't rust or corrode, because a noble metal's electrons don't interact with those of oxygen (or anything else).

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