Prices, Inflation/Deflation, Interest Rates & The Fed

I'm not sold on crypto only because its just not something I'm interested in. So I try not to speak with authority on the subject, although I think it resembles a ponzi scheme. However, I can observe a chart during dollar shortages. A deflationary currency for a deflationary future? I can't comment on this.



This isn't Reddit. We're discussing complex real-world things. By your understanding, I can say there's mass deflation because I got a free fry with my Big Mac today.



I think it's somewhat established around here that I've done okay for myself and I like to put my money where my mouth is.

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Going forward though, I'm ignoring any of you who claim there's money printing happening or who suggest the dollar is a domestic currency. You're wasting everyone's time with your easily-disproved propaganda and nonsense.
Yes, the dollar is the global currency. It was once “backed” by gold, which is simply a mechanism of enforcing a limited supply. Now it is “backed” by government debt, which is limitless, therefore the supply is unlimited.
Money is simply the most desirable good, because it can be traded for any other good.
The price of a good trends towards its marginal cost to produce. Dollars cost exactly nothing to produce.
 

holgerdanske

Woodpecker
We shouldn’t have bailed out Wall Street in 2008. It wouldn’t have been the single cure for our compounded problems, but the initial pain would have been over by now and we could have at least tried to implement something better. Instead, we now have a Wall Street that faces no real threats from either political party and is basically a club of backslapping insiders along with the Fed and Treasury. It’s too bad most the Occupy Wall Street crowd seems more concerned with mean tweets and defending men wagging their dicks in female spas these days.
Nothing is black and white in life. Without the 2008 financial crisis we would not have Bitcoin after all, which was a direct consequence of financial corruption having gone systemic. Over the long term Wall Street has dug its own grave, some of the implications are already starting to take hold.
 

Blade Runner

Ostrich
Orthodox
Another word that comes to mind is 'unaffordable'. The prices you are seeing are a direct result of run away inflation. I mean we live in a time when the Fed keeps jawboning about 'transitory inflation' which officially is quoted at 5.5% but is much closer to 10%.

The problem we all face is that QE and infinite bond purchases have worked for such a long time. Basically all the Austrians who kept warning about moral hazard and hyperinflation continue to be laughed out of the room, precisely because we've had over a decade of Keynesian monetary policy without much (observable) consequence.

What most analysts and economists do not seem to understand is that inflation is exponential, imagine a hockey stick graph. It builds up slowly over time and by the time you start to panic it's way too late to reverse course.

By the way, in the long term this is a good thing. Human beings need to experience periods of true difficulty and suffering every other generation or so. The carelessness, hedonism, and licentiousness I continue to observe among the broader population is nothing short of stunning.

The gobalists wanted a 'big reset' and just like mythological Faust they have no idea what they are actually in for. If the U.S. Dollar loses its reserve currency status the entire country is in for literally decades of readjustment. Some people will thrive, but for most the new reality and drop in collective wealth will be a tough pill to swallow.

And this does not even account for the cultural long term damage that is currently being inflicted on the population by a ruthless and ideologically driven mainstream media. Beyond a multitude of external problems the U.S. is heading for a veritable civil war slash race war.

I've said it before and I'll say it again: This is going to be a very dismal winter for many people. Make sure that you are sufficiently prepared.
Great post. I think most people who are solid in critical thinking and honest about what is going on will see that many of your points are not only well supported, but critically important to survive or put yourself ahead in the coming years when people "realize" what we have seen (coming) for years. That's what the mass man does, though - wakes up and acts like you didn't tell him that there's a crisis and life isn't gonna be too great for the foreseeable future - which then causes him and all the other chickens to panic and act out, making things even worse for them and everyone else around.

Out of curiosity, holgerdanske, who do you believe is in the category of the "some people will thrive"? Are you suggesting supply chains also exponentially break down over the winter?
 

Blade Runner

Ostrich
Orthodox
Nothing is black and white in life. Without the 2008 financial crisis we would not have Bitcoin after all, which was a direct consequence of financial corruption having gone systemic. Over the long term Wall Street has dug its own grave, some of the implications are already starting to take hold.
Yes, there are many things that are, but the aggregate is a complex system. The black and white (there was a crisis) created, or urged on, BTC, as you say.

Anyway, getting back on topic, I'm curious as to why @EndlessGravity doesn't think that what we are seeing can be combined into a thesis such as mine: Multiple sectors of inflation causing more and more monetary problems which lead to deflationary spiral events/social issues/war.

His last post in which he explained a lot of his thinking was good, but I don't see how that goes against what guys like me, and a few others, are saying.
 
Yes, there are many things that are, but the aggregate is a complex system. The black and white (there was a crisis) created, or urged on, BTC, as you say.

Anyway, getting back on topic, I'm curious as to why @EndlessGravity doesn't think that what we are seeing can be combined into a thesis such as mine: Multiple sectors of inflation causing more and more monetary problems which lead to deflationary spiral events/social issues/war.

His last post in which he explained a lot of his thinking was good, but I don't see how that goes against what guys like me, and a few others, are saying.
@EndlessGravity is correct about deflationary forces, but has a different view of what the central banks are doing, and the distortions they are causing by trying to generate inflation. I suggest this book:
A77F5D26-FC0C-450F-8BEC-5823D8AC01DC.png
 

holgerdanske

Woodpecker
Great post. I think most people who are solid in critical thinking and honest about what is going on will see that many of your points are not only well supported, but critically important to survive or put yourself ahead in the coming years when people "realize" what we have seen (coming) for years. That's what the mass man does, though - wakes up and acts like you didn't tell him that there's a crisis and life isn't gonna be too great for the foreseeable future - which then causes him and all the other chickens to panic and act out, making things even worse for them and everyone else around.

Out of curiosity, holgerdanske, who do you believe is in the category of the "some people will thrive"? Are you suggesting supply chains also exponentially break down over the winter?

  1. Property owners. Residential real estate, mainly in rural areas in certain key states (both in the U.S. and in Europe).
  2. Agricultural property owners/producers. I could have included that in 1) but it deserves its own emphasis. The ability to produce and process food will massively gain in importance. The global supply chain pre 2019 will not come back for a long time.
  3. Manufacturers and producers across the entire supply chain. Again, the global supply chain as we know it will not come back. China will be in the winning seat on that end but may restrict access to the West based on continued political tensions.
  4. Crypto currency holders. This space will be extremely polarized between a small minority of people who own a significant amount of crypto currencies and the vast majority who own nearly none.
  5. Qualified knowledge workers. The rapid adoption of race quotas and affirmative action is already rendering many companies extremely inefficient whilst Biden COVID policies are driving out some of their top talent, i.e. independent and highly intelligent professionals. The impact of this labor exodus has not yet set in but will most likely drive many of these companies into bankruptcy. Also let's not forget that with many boomers retiring we are already seeing massive labor shortages across all industries. There are certain things that cannot be outsourced and Europe and the U.S. in particular are about to learn a very painful lesson. By the way when i say 'qualified workers' I don't mean young kids with useless college degrees, but people with experience in their respective fields. Many skills will in fact be lost and it will take decades to recover from this.
  6. Security companies. The coming decades will be rife with crime, civil conflict, and corruption. People will pay good money to ex-military and ex-police forces to protect their property and assets. Many are currently being driven out of their ranks, again due to Biden's COVID policies.
By the way, supply chains have already broken down. It's even being reported by the mainstream media at this point, which means that things are about to get very bad. Load up on food staple items, load up on fuel if you can, and stay away from any major city. You don't want to be surrounded by tens of thousands of cold and hungry people.
 
@holgerdanske
Agree on all your points, except I think property and landowners will get screwed. Look at South Africa, Venezuela, Cuba... The US now with eviction moratorium. The government owns your property and will enforce that with violence. If productive land and housing becomes vital, it will be redistributed "for the greater good."
 

cosine

Robin
If you only take earnings into account, yes, it is crazy high. If you adjust it for the 10 year treasury yield, it doesn't look quite as bad.
Cathie Wood also made the argument that PE valuations of 20 made sense with economic growth at 5%. She argued that 1 divided by 5% = 20, whereas if our economy is growing more slowly, like 2-3% per year, then 1 divided by 3% = 33, or 1 over 2% = 50. So, her argument was that slower growth made sense with PE valuations of 30-50. Seemed like an uncommon argument but not crazy.
 

Blade Runner

Ostrich
Orthodox
Aren't those fairly, or possibly completely, unrelated? Valuations are high mainly for reasons which we have stated - not necessarily slow growth (that comes along with it) but rather finding "real assets" as opposed to financial/USD related devices.
 

Eusebius Erasmus

Pelican
Orthodox
Cathie Wood also made the argument that PE valuations of 20 made sense with economic growth at 5%. She argued that 1 divided by 5% = 20, whereas if our economy is growing more slowly, like 2-3% per year, then 1 divided by 3% = 33, or 1 over 2% = 50. So, her argument was that slower growth made sense with PE valuations of 30-50. Seemed like an uncommon argument but not crazy.
Cathie Wood made some incredibly unwise investments in Tesla, and to top that all off she predicted a meteoric rise for the company that did not manifest. I take everything she says with a grain of salt.

Michael Burry, on the other hand, seems to have his mind in the right place.
 

cosine

Robin
Cathie Wood made some incredibly unwise investments in Tesla, and to top that all off she predicted a meteoric rise for the company that did not manifest. I take everything she says with a grain of salt.

Michael Burry, on the other hand, seems to have his mind in the right place.

What on earth is wrong with you? You have it completely, totally backwards.

In 2018 Cathie Wood predicted shares would hit $4,000 a share. After the 5:1 split in 2020, her adjusted $800 prediction has been totally realized. They called her crazy, but she nailed it, blew away most other asset managers, and made a name for herself.


Michael Burry admitted that his Tesla short position has been painful during its meteoric rise, and just recently said that he no longer holds a short position against it.

 

Eusebius Erasmus

Pelican
Orthodox
What on earth is wrong with you? You have it completely, totally backwards.

In 2018 Cathie Wood predicted shares would hit $4,000 a share. After the 5:1 split in 2020, her adjusted $800 prediction has been totally realized. They called her crazy, but she nailed it, blew away most other asset managers, and made a name for herself.


Michael Burry admitted that his Tesla short position has been painful during its meteoric rise, and just recently said that he no longer holds a short position against it.


Burry's position isn't crucially contingent on Tesla. Wood's is.

Look at what she did recently, despite predicting enormous price gains:

 

vstk

Pigeon
I would say that both Cathie Wood and Michael Burry have been right on Tesla so far as they both made money on the stock.

Burry was early but his trade was profitable - he was buying put options on the way up and sold out as TSLA crashed from 900 to 550. They don't really have the same time horizon. Michael Burry is not a long term investor. He does find good trades.

The one who was dead wrong about Tesla is Steve Eisman, another guy from the movie "the big short".
 
Yes, there are many things that are, but the aggregate is a complex system. The black and white (there was a crisis) created, or urged on, BTC, as you say.

Anyway, getting back on topic, I'm curious as to why @EndlessGravity doesn't think that what we are seeing can be combined into a thesis such as mine: Multiple sectors of inflation causing more and more monetary problems which lead to deflationary spiral events/social issues/war.

His last post in which he explained a lot of his thinking was good, but I don't see how that goes against what guys like me, and a few others, are saying.

My problem is calling this inflation muddies the waters and confuses people, especially given the economic illiteracy in the country. This is why conservatives sites are able to rip off so many people by selling gold during the top of these cycles. They're stupid (by virtue of being deeply uncurious about how these things work) and they know it but the lie benefits them. This is also true of most people you'll meet in finance, trading, banking, etc.

"Inflation! Get ready! Spend every dollar! Buy gold and silver! Meme stocks! And real estate! Don't forget this overpriced property I have to sell you!"

Not only are these people always wrong, they convince people to make investing or monetary decisions which are often the exact opposite of what regular people should be doing. You and I agree, there will be more select price increases and this will cause problems. However, a shortage of collateral and cash with banks refusing to lend to each other...means you should be making decisions for this environment, not an inflationary one.

@EndlessGravity is correct about deflationary forces, but has a different view of what the central banks are doing, and the distortions they are causing by trying to generate inflation. I suggest this book:

No existing bank is central to a global currency. However, I will definitely check out this book.
 
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