American Economics Thread
- Thread starter Bernard
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Base effects. Inflation is not there. Money is free and leads to infinite growth with no downsides
The US south west and California is facing relentless water problem as the lakes and waterways are shrinking to record level.
The Hoover dam hydro plant might even out of action soon if trend continue in the next few weeks ahead. I guess one can blame over development, over farming and having too many golf courses, besides uncaring politicians for this situation.
The Hoover dam hydro plant might even out of action soon if trend continue in the next few weeks ahead. I guess one can blame over development, over farming and having too many golf courses, besides uncaring politicians for this situation.
Equation
Lieutenant General
If you follow YouTube economists, you get variations where the US inflation is going.
Inflation - > more or permanent inflation (like the '70s)
Inflation -> hyperinflation (Dr. Doom)
Inflation -> stagflation (inflation without growth)
Inflation -> deflation (the US is already structured for deflation before Covid).
Inflation -> severe deflation (depends on how bad you want to put it)
Inflation scenario because the Feds is addicted to printing money.
Hyperinflation scenario because there is no brakes to printing money.
Deflation scenario because inflation is transitory and demand will drop unless you inject more stimulus.
Stagflation scenario in which not only will the demand drop, producers and suppliers will not drop their prices despite the demand drop.
Inflation - > more or permanent inflation (like the '70s)
Inflation -> hyperinflation (Dr. Doom)
Inflation -> stagflation (inflation without growth)
Inflation -> deflation (the US is already structured for deflation before Covid).
Inflation -> severe deflation (depends on how bad you want to put it)
Inflation scenario because the Feds is addicted to printing money.
Hyperinflation scenario because there is no brakes to printing money.
Deflation scenario because inflation is transitory and demand will drop unless you inject more stimulus.
Stagflation scenario in which not only will the demand drop, producers and suppliers will not drop their prices despite the demand drop.
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That is a very good summary.
I still like the stagflation scenario, but I like the deflation scenario a little more.
However, that is not important for you and me and all of us.
The most important scenario is the rich will git richer scenario.
That is the most important scenario to understand.
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Seems to me, if the deflationary scenario comes, then gold will not do well, but all other asset classes should rise, regardless of the scenario.
Gold is just sitting there at these levels, not doing much. There is doubt about long term inflation. Otherwise we should see the gold doing something. Real estate is a inflation hedge, but even with deflation it still goes up because it gets rents therefore a yield, a yield in deflationary environment is pretty good.
Stocks are not bad in any scenario other than another financial panic. That was the old term in the books, today we call that a financial crisis. When the next financial crisis hits, sell everything in the stocks, and maybe try to buy back later. The system is unstable, so another financial crisis is probably brewing a will arrive in a few years.
Seems to me that back in the old days in the 17th century America, financial panics came around every ten years or so. Let's see if there are any cracks in system five years from now.
I think gold is overrated. The most common argument for gold is that it is God's money. It is the universal currency and standard of value for humankind for thousands of years.
The argument against that is that humankind has been using horse as the standard for transportation for the same thousands of years. But we don't use horse now.
Most common asset classes that people are throwing their money is real estate and tech stocks. I don't mean stocks I mean tech stocks. However both are already highly overinflated and will inflate further. Crypto I don't know, the problem of crypto is that it lacks institutional support. However, countries facing hyperinflation like Venenzuela, are starting to use crypto. But because crypto is being used as a means of wealth transfer behind central banks or the Swift system, more industrialized countries are going to clamp down on it.
The danger with commodities is that while they seem to be going up, they can come down. That's what happened to lumber. It seemed to be a better investment than stocks and gold for a while then suddenly falling recently. This actually brings credence to the transitory inflation to deflation theory which suggests we do not have sustained organic demand, and therefore the economy does not have the fuel, legs and stamina for a sustained recovery. So you're going up then down. Third Covid wave led by Delta and new variants are adding to that fear. Another is the spike of iron ore prices, which proved to be not permanent and appears to be coming down. This seems like China is putting the breaks on its economy and tampering demand, which IMO might be a good thing for China to tamper down inflation but is going to freak out the rest of the world who believes that China should lead the world in global economic recovery.
All this Fed money printing means plenty of dollars going to China to absurd toxic levels of accumulation that its becoming a problem of where and how to use these dollars wisely. If you start to use these US dollars to start buying commodities and resources of the market in huge quantities, this will trigger global inflation as these US dollars will bid prices of these commodities higher. This isn't good for everyone, particularly the poor who can buy even less with their money.
The argument against that is that humankind has been using horse as the standard for transportation for the same thousands of years. But we don't use horse now.
Most common asset classes that people are throwing their money is real estate and tech stocks. I don't mean stocks I mean tech stocks. However both are already highly overinflated and will inflate further. Crypto I don't know, the problem of crypto is that it lacks institutional support. However, countries facing hyperinflation like Venenzuela, are starting to use crypto. But because crypto is being used as a means of wealth transfer behind central banks or the Swift system, more industrialized countries are going to clamp down on it.
The danger with commodities is that while they seem to be going up, they can come down. That's what happened to lumber. It seemed to be a better investment than stocks and gold for a while then suddenly falling recently. This actually brings credence to the transitory inflation to deflation theory which suggests we do not have sustained organic demand, and therefore the economy does not have the fuel, legs and stamina for a sustained recovery. So you're going up then down. Third Covid wave led by Delta and new variants are adding to that fear. Another is the spike of iron ore prices, which proved to be not permanent and appears to be coming down. This seems like China is putting the breaks on its economy and tampering demand, which IMO might be a good thing for China to tamper down inflation but is going to freak out the rest of the world who believes that China should lead the world in global economic recovery.
All this Fed money printing means plenty of dollars going to China to absurd toxic levels of accumulation that its becoming a problem of where and how to use these dollars wisely. If you start to use these US dollars to start buying commodities and resources of the market in huge quantities, this will trigger global inflation as these US dollars will bid prices of these commodities higher. This isn't good for everyone, particularly the poor who can buy even less with their money.
