Prices, Inflation/Deflation, Interest Rates & The Fed

[Blade Runner]

You're asking a crazy broad question at what is one of the most uncertain points in the entirety of human history. If there's a certain area you're thinking of, let me know. I don't like to give broad advice...however, I should be mercilessly held to whatever I say. Life will hold me to it anyway and with much less care. Your criticism, when intelligent, is the most valuable thing you can give.

That said, the system is insolvent and hobbling along but in a broken away. It's amazing the eurodollar DIDN'T implode in 2020 and speaks to how ingrained this system is. However, China isn't buying our BS anymore, which is why they aren't just NOT saving Evergrande, they're actually DOING the collapsing of their own real estate market (this should clue you in to what they think about "inflation"). Without China's growth, the worldwide demand for commodities will significantly fall. Secondary to that, the US consumer, the one who buys the world's junk, is changing his outlook on his spending, debt, traveling, etc. Many Americans don't have the money to pay their mortgages anymore (let's call it 10% of total), let alone rent (35% of total, with mortgages 1/3 of Americans) or student loans (99%). Few businesses are profitable any longer (and they can't pay their office rent either). Furthermore the banks don't trust each other to lend overnight.

Given all this, when the next dollar shortages comes it will be ugly (and deflation in the open). There are only a few solutions.

1. Shut the world in their houses
2. War
3. Subjugation
4. A new system
5. Or a combination of each of these.

You saw 1) in 2020. My money next time is on a bit of everything. Best bet? You should be selling everything you bought at the bottom of the last crash to the suckers buying things at high prices (I suspect @Arado is a seller himself, which is why he likes the inflation narrative). Otherwise, buy a house that butts up to a very big preserve, stop buying useless crap, gain as many hard skills as you can, and pray. The world of careers and make-work is probably drawing to a close. Either we see a historic supernova of defaults or we slide into third world status. However, there's always plenty of time still left for more shenanigans by the government.

Thanks for the reply. What I've been trying to do everywhere I go is to convince people of the synthesis of the inflation leading to disinflation, then deflationary pressures finally take over (as is your position), and the spiral comes from the insolvencies. A bit of everything sounds pretty realistic. When is your best guess for the shortage that creates the really bad combo everyone is awaiting? It sounds like you are pretty darn bearish on this system. I'm saying a market crisis occurs in mid to late 2022, and if not, between 2023-24.

I guess the best next prediction about which of the non-war steps that are taken will be more clear by Q1-Q2 next year.

 

[EndlessGravity]

Thanks for the reply. What I've been trying to do everywhere I go is to convince people of the synthesis of the inflation leading to disinflation, then deflationary pressures finally take over (as is your position), and the spiral comes from the insolvencies. A bit of everything sounds pretty realistic. When is your best guess for the shortage that creates the really bad combo everyone is awaiting? It sounds like you are pretty darn bearish on this system. I'm saying a market crisis occurs in mid to late 2022, and if not, between 2023-24.

I guess the best next prediction about which of the non-war steps that are taken will be more clear by Q1-Q2 next year.

I don't have any insight on where the shortage will happen again (but we're on the 7th or 8th in 2 decades and coming up on another.) However, along with real estate and stock market in different major segments, I keep an eye on...

• Repo fails
• A basket of currencies vs the dollar (for when it becomes more expensive for countries to buy the dollars they need)
• Japanese and German 10 year rates
• US yield curve
• LIBOR
• TICS
• and segments of global export/imports

Sorry, Jordan Peterson, I haven't added your so-very-critical Twitter feed to my inflation indicators yet!

Bearish? I'm almost exclusively in cash. This is a defensive position for whenever we see the next shortage. Timing the market is for suckers. Where you and I differ is what you're calling inflation isn't broad price increase due to "money printing," as I've outlined. It won't only not last long, it's almost entirely limited to the US. Otherwise we sound like we mostly agree.

I think it's not likely they'll be able to replace the dollar system with a "Great Reset" system. They're going to try but the people who run our world are just too stupid. Instead the dollar system will probably hobble along like a crappy used car like we've seen for the past 2 decades. Notice since 2000 we've had anemic growth punctured by periods of significant drops. The car is running out of gas. What we know is the system is unlikely to magically rise up and have the best years ever all of the sudden.

 

[Blade Runner]

I don't have any insight on where the shortage will happen again (but we're on the 7th or 8th in 2 decades and coming up on another.) However, along with real estate and stock market in different major segments, I keep an eye on...

• Repo fails
• A basket of currencies vs the dollar (for when it becomes more expensive for countries to buy the dollars they need)
• Japanese and German 10 year rates
• US yield curve
• LIBOR
• TICS
• and segments of global export/imports

Sorry, Jordan Peterson, I haven't added your so-very-critical Twitter feed to my inflation indicators yet!

Bearish? I'm almost exclusively in cash. This is a defensive position for whenever we see the next shortage. Timing the market is for suckers. Where you and I differ is what you're calling inflation isn't broad price increase due to "money printing," as I've outlined. It won't only not last long, it's almost entirely limited to the US. Otherwise we sound like we mostly agree.

I think it's not likely they'll be able to replace the dollar system with a "Great Reset" system. They're going to try but the people who run our world are just too stupid. Instead the dollar system will probably hobble along like a crappy used car like we've seen for the past 2 decades. Notice since 2000 we've had anemic growth punctured by periods of significant drops. The car is running out of gas. What we know is the system is unlikely to magically rise up and have the best years ever all of the sudden.

I'm 50% stocks (some of which are related to crypto), 20% cash, 30% crypto. By Q1-2 next year I'll be 50-50 cash and crypto, almost certainly. Just throwing that out there. I might have one of those government retirement devices with paper assets including commodities or crypto at that time, but only because I have to, that would be my only "stocks" at the time and I might be conservative such as in oil or energy type stuff.

We don't have to revisit the "broad price increases", people can go back and see those arguments over and over if they wish. I tend to agree that the dollar system will hobble along. I have my concerns, especially with buttheads like Gill Bates and their "predictions" but I'm not too sure who is dumber, the elitists or the normies around me so hooked to the old life they had. Growth moving ahead is for sure a joke, that's why I think in Q2 of next year a LOT more people will realize this can't go on much longer. It's been clear to many of us for years but even the average Joe will "notice" when his prices/cost of living are sky high relative to the recent past.

 

[Blade Runner]

A snafu looked like the system double posted me here.

 

[budoslavic]

 

[oldfaith]

We had the fastest, most aggressive crash in all recorded history, and the S&P is up more than 30% since then, with little real economic growth, probably still honestly economic contraction in the US. We have asset inflation that is wrecking the middle class, with "medium-sized" consumer goods inflation. Jumped just according to last month's numbers.

The world is flush with fiat currency, and it's going into assets. We have asset inflation.


Source:

The Rising Cost of College in the U.S.

Since 1980, the average cost of college has risen by 1200%. This chart compares the inflation in college tuition with overall inflation.

www.visualcapitalist.com

Even the super-expensive Bay Area didn't budge, despite so many high-paying Silicon Valley jobs going remote.

And it's been in assets for few years already....not just going into them now. Just saying.
People who bought real estate in 2019 in most places had a handsome deal to protect their money - the curves are looking exponential for most states since July 2020. My mother bought in SF bay area in 1999, for 300K, she sold it for 1.5M later around 2017. Sold when that curve you posted slowed down a bit.
By the way, you can't beat the climate around those parts of NorCal coast. The only reason to leave CA for TX is freedom.... but most people who live in Bay Area don't even have a concept of it, so I don't see them leaving.

 

[cosine]

By the way, you can't beat the climate around those parts of NorCal coast. The only reason to leave CA for TX is freedom.... but most people who live in Bay Area don't even have a concept of it, so I don't see them leaving.

California is the most beautiful state in the union, and it has been turned into a dumpster fire.

It's also a frog-boiling-in-a-pot, like you said. People there, similarly to NYC I think, just figure it's the best place, so there's no reason to leave.

 

[budoslavic]

The US government may run out of money by December 15, Treasury Secretary Janet Yellen warned Tuesday in a letter encouraging lawmakers to raise the country’s debt limit to avoid a default.

Democrats and Republicans in Washington have squabbled in recent months over raising the legal limit on how much debt the United States can accumulate.

In October, they came within days of hitting the ceiling before agreeing to a $480 billion stop-gap hike, which Yellen said would keep the government running until December 3.

In a letter to House Speaker Nancy Pelosi, the Treasury secretary extended her prediction for when the deadline would be hit by about two weeks. But she warned: “there are scenarios in which Treasury would be left with insufficient remaining resources to continue to finance the operations of the US government beyond this date.”

“To ensure the full faith and credit of the United States, it is critical that Congress raise or suspend the debt limit as soon as possible,” Yellen wrote.

The latest imbroglio comes in the midst of long-running negotiations over Democratic President Joe Biden’s “Build Back Better” plan to invest $1.85 trillion in American social social services and education.

The Republican minority in Congress opposes the measure, and has said it will not agree to debt ceiling increases to pay for it, although much of the debt the US government takes on funds outlays approved by prior Democratic and Republican administrations.

In October, they argued that Democrats who lead the House and Senate should raise the limit unilaterally, before eventually dropping their blockade to allow passage of the temporary increase.

The United States has never defaulted on its debt and its Treasury bonds play a major role in the global financial system, but economists warn a failure to raise the ceiling would cause a massive financial crisis.

Yellen warns US could again hit debt limit on December 15 - Breitbart

The US government may run out of money by December 15, Treasury Secretary Janet Yellen warned Tuesday in a letter encouraging lawmakers to raise the

www.breitbart.com

 

[NoMoreTO]

A couple of my favourite youtubers on the inflation topic.

Lynette Zhang speaking with Arpad, a Romanian who lived through some hard times in Romania having something physical and barterable outside the system as well as community connections and farming.

With Arpad, it's always a little bit of a walk down the brutal side of hyperinflation. He explains how his family sold a homestead for 2M in romanian currency, the hyperinflation caused devalued the money so much the family used this same amount (2M) to purchase a single gold chain.

 

[oldfaith]

A couple of my favourite youtubers on the inflation topic.

Lynette Zhang speaking with Arpad, a Romanian who lived through some hard times in Romania having something physical and barterable outside the system as well as community connections and farming.

With Arpad, it's always a little bit of a walk down the brutal side of hyperinflation. He explains how his family sold a homestead for 2M in romanian currency, the hyperinflation caused devalued the money so much the family used this same amount (2M) to purchase a single gold chain.

The very worst mistake people did during hyperinflation in ex-Soviet block was to sell their real estate in the middle of it, mistakenly thinking it became near-worthless forever and trying to salvage that last penny.
Not only real estate was pretty much the only thing there that upheld the values and appreciated, over time, it also provided a roof over the head and been a source of food during hard times, plus having potential for rental income. More remote villages did lose population and houses just went to rot, devalued for decades, but anything closer to cities or towns held up.

 

[cosine]

Interesting how Kyle Bass describes the chained inflation calculation using cars as an example.

If a 1985 Toyota Camry cost $15k, had roll-down windows, primitive airbags, etc
And a 2021 Toyota Camry costs $35k, has nice features, then they remove the price of the newer features before calculating inflation.

So, in order to stay in-line with CPI, you'd have to go find a car without modern features, so this isn't just Teslas. I suppose you could find a cheap Japanese car, but I don't believe you can find a new Ford or Chevy with roll-down windows today. Ford sells almost no passenger cars anymore.

Surely the same happens with nearly all electronics. The gov't is incentivized to remove anything that will show CPI rising. They don't put food or energy into CPI. So it's fine if you don't drive or eat.

 

[Blade Runner]

It's pretty clear on multiple levels that if you use CPI formulations of the 1970s and early 80s, inflation is at least 15%. This is why using CPI as a metric for "inflation" is disingenuous, to say the least.

The problem is that since it's not "hyperinflation", yet another term disagreed upon, the disinflation or deflationary trends camp will just distract and start talking about other things, or poo poo it, etc.

Again, if you are challenging that inflation ultimately somehow doesn't matter, and we are going towards a large deflationary event because of other reasons, just state that. But the dis/de people don't. That's what is so annoying. Everything we see and all the data shows us, beyond common sense. It's pathetic at this point. Let me reiterate now, before bad characterization of argument comes back in here, that I am in the camp that inflation occurs, then it leads to bad economic events and thus deflation through insolvency, defaults, no more discretionary income for most wage earners/non savers/those reliant on the USD without knowledge or ability to counteract it.

 

[cosine]

I am in the camp that inflation occurs, then it leads to bad economic events and thus deflation through insolvency, defaults, no more discretionary income for most wage earners/non savers/those reliant on the USD without knowledge or ability to counteract it.

The S&P was at $3,380 right before the 2020 crash, and now it's $4,704. 39% increase. If you managed to buy the dip perfectly, you're up 100% just from the S&P.

All the extra dough from COVID stimuli went directly into investments. Sure, peons got $1200 and $1400 checks, but businesses got much, much more in the form of PPP loans, and then the gov't simply forgave most of those loans. Where'd they put their money? FAANG stocks.

Then the Bernie Sanders types began complaining about how much tech billionaires made since March 2020. The billionaires didn't even try, the public simply decided to enrich them.

The automation wave that is just getting going will spur deflation, but only in wages. The people who own the assets(automation companies) will make a killing. Andrew Yang and Bernie Sanders types will try to tax them, generally fail, and get the gov't to spend more money on UBI.

 

[cosine]

 

[cosine]

The S&P was at $3,380 right before the 2020 crash, and now it's $4,704. 39% increase. If you managed to buy the dip perfectly, you're up 100% just from the S&P.

I'm quoting myself above, but... the situation is truly insane when you consider:
- Global supply chain bottlenecks and shortages
- The 2020 wave of business closures
- The "great resignation" where millions of Americans quit their jobs

By all accounts, we should be in a brutal recession. Labor is hard to find, houses and cars aren't being built, businesses have closed... yet, the S&P is up 39% and the Nasdaq is up even more.

There is no other explanation than the dramatic expansion of central bank balance sheets. Sure, they don't technically print money, they just "acquire trillions of dollars of assets that no institution(besides cheating government) could ever possibly acquire"

Probably a lot of people in this thread think crypto is garbage. I used to think it was too, but Bitcoin is essentially nerds saying, "the government is not to be trusted with the money supply" and moving it to a decentralized system. Now I'd argue that the events of 2020 made bitcoin a reality. I now believe that it is stupid to own zero bitcoin. Allocating 1% to 5% in order to exit the government-controlled fiat system seems entirely worthwhile to me.

If anyone can seriously engage with Michael Saylor's key arguments for bitcoin and refute him, I'd love to be proven wrong, dump my bitcoin, and continue my real estate investments instead.

 

[oldfaith]

By all accounts, we should be in a brutal recession. Labor is hard to find, houses and cars aren't being built, businesses have closed... yet, the S&P is up 39% and the Nasdaq is up even more.

There is no other explanation than the dramatic expansion of central bank balance sheets. Sure, they don't technically print money, they just "acquire trillions of dollars of assets that no institution(besides cheating government) could ever possibly acquire"

Probably a lot of people in this thread think crypto is garbage. I used to think it was too, but Bitcoin is essentially nerds saying, "the government is not to be trusted with the money supply" and moving it to a decentralized system. Now I'd argue that the events of 2020 made bitcoin a reality. I now believe that it is stupid to own zero bitcoin. Allocating 1% to 5% in order to exit the government-controlled fiat system seems entirely worthwhile to me.

S&P is completely fake, artificially pumped and manipulated for decades all-American savings and retirement account.
It's been guaranteed Bernanke Put, Powell Put, there's no reason to think there'll be anything different.
The prior big crashes....had been well timed to presidential elections, 2008 was a clear Obama install for example.
1-5% in bitcoin I think is reasonable...but I hear about people putting huge percentages of their savings in it.

 

[kurtybro]

S&P is completely fake, artificially pumped and manipulated for decades all-American savings and retirement account.
It's been guaranteed Bernanke Put, Powell Put, there's no reason to think there'll be anything different.
The prior big crashes....had been well timed to presidential elections, 2008 was a clear Obama install for example.
1-5% in bitcoin I think is reasonable...but I hear about people putting huge percentages of their savings in it.

Most people putting huge percentages of their N/W are the youngsters who know it's their best Hail Mary hope of any future in the current environment. What are the counter arguments for inflation inevitably getting out of control? What would it take for the central banks to stop printing? It's almost certain "programmable" CBDC's will be implemented within a short time, after the engineered destruction of the global economy, with complete control ending up in the hands of the magic money creator men. With BTC we know what the official rate of inflation is going to be, and that it cannot be altered by any central planning. We also know the protocol rules cannot be easily changed, eventually we'll also have total fungibility, with the ability to actually OWN your money.... Although maybe none of this will matter and the majority simply don't care about any of this crap because its too much thinking and is interrupting their plugged in life between pleasure seeking activities and virus panic.


BTC is a great inflation / fiat hedge, but its not without risks -- regulatory, financial custodian fuckery (like fractional reserve lending)and inherent (the coders involved with the development). The most important thing is for people to understand the philosophy of bitcoin and exactly what problems its trying to solve, and how. Unfortunately, as the past 2 years has shown us, alot of people will simply end up "believing" the most consistent messaging that's being beamed to them...so the risk of centralized institutions becoming the primary custodians of BTC and 'fiatizing' it is real. The only issue is that Bitcoin is still "hard" to operate, has a steep learning curve, and takes alot of research to drill down into exactly what it is and how it works under the hood and the philosophy behind it, but if you're able to persevere you realize no better alternative exists. I don't know of anyone who spent the time, got to a good level of understanding about bitcoin and still thinks we should remain on the current fiat standard. It's a one way street, there's no going back. The writing is on the wall, centralized control over every single part of your life is on the horizon. Woke climate change today, who knows what tomorrow? If you know, you know.

 

[Joachim-Gaius]

Thanks for the reply. What I've been trying to do everywhere I go is to convince people of the synthesis of the inflation leading to disinflation, then deflationary pressures finally take over (as is your position), and the spiral comes from the insolvencies. A bit of everything sounds pretty realistic. When is your best guess for the shortage that creates the really bad combo everyone is awaiting? It sounds like you are pretty darn bearish on this system. I'm saying a market crisis occurs in mid to late 2022, and if not, between 2023-24.

I guess the best next prediction about which of the non-war steps that are taken will be more clear by Q1-Q2 next year.

Believe you are right. Seems like what monetary and government officials are most afraid of is deflation brought on by demographic decline. 2083 appears to be the year that the Earth's population will decline, although birth rates are already reported below the replacement rate. But between now and 2083 we are in for a roll coaster of inflationary and deflationary effects.

 

[DeusLuxMeaEst]

We focus on the inflation in the US, but this is a worldwide problem. Countries like Lebanon and Turkey are getting hammered, not to mention the usual suspects like Venezuela and Argentina.

Sri Lanka, Iran, S. Africa, Ukraine, Egypt, and Pakistan could also be feeling the hyperinflationary heat in the next 12-24 months.

 

[Joachim-Gaius]

S&P is completely fake, artificially pumped and manipulated for decades all-American savings and retirement account.
It's been guaranteed Bernanke Put, Powell Put, there's no reason to think there'll be anything different.
The prior big crashes....had been well timed to presidential elections, 2008 was a clear Obama install for example.
1-5% in bitcoin I think is reasonable...but I hear about people putting huge percentages of their savings in it.

You completely nailed it. The S&P500 is far more risky than the average person realizes it to be. 6 stocks represent approximately 25% of the S&P500's value (cap weighted) . . . one of which is Telsa with a P/E ratio that swings between 300 - 1200+. And yet S&P500 cap weighted funds make up a cornerstone of nearly every pension scheme in the world. But it is a psychological feat to not invest some of one's assets into such funds, as they have truly triumphed. Not certain what the answer is, but we do know that the temptation to manipulate public markets has proven to tempting for central banks to avoid.