muses of the moment

April 22, 2015

Regarding inflation vs. deflation

There is an ongoing debate about what the US is going thru and what it will go thru: inflation or deflation?

Martin Armstrong says we are in a deflationary monetary cycle. And in the big picture, he is right.

However,

Groovygirl has always said, it depends where you are. And gg has always said, it doesn’t matter how cheap a product/service is, if you don’t have any money to buy it. It is always about can your wages buy the necessaries or not? It really doesn’t matter the actual price, it’s the relation. Can you pay cash to buy a car or must you borrow? Can you borrow? Can you afford the monthly payment? A house? College? Health care? What percentage of your monthly income is spent on debt? 10%, 25%, 50%? If your wages go down, it could turn into 75% overnight?

I remember my grandfather talking about the Depression. He said he was much better off than many people because he had a steady job. He didn’t get a raise for 10 years, but he could save money and buy a car, because prices were low or relatively lower than before 1929/1930. He didn’t have to go in debt to survive. He could pay for food and rental housing and some extras like a car. And he wasn’t ever unemployed during that time.

People were in trouble during the Depression, because they couldn’t get a job, couldn’t earn enough (Farmers) to buy food and shelter, or couldn’t keep a steady income over that 10-year period and fell into debt to buy necessities. So, prices were expensive to them and many were starving and homeless.

It’s the relation of wages (employment) to prices. That’s why people are protesting for a higher minimum wage.

(That’s why people are leaving California with its high state income taxes and high property taxes for the Midwest. That’s why seniors are flocking to states, like Florida, that have no state taxes. People that can move are moving. They can do math and they can save 10-30% simply by moving to a different state and might get a better or steady job.)

But in Germany in the 1930’s, it was all about inflation. But inflation in prices didn’t keep up with wages (because of the country’s debt and their short-term solution of currency manipulation). It was still about the disconnect between wages and prices, but this time is was an inflationary macro environment.

So, structure investments, jobs, and assets to bring in income/gains that will keep up with prices in your home currency. And don’t forget about taxes. Income taxes and other taxes were not as extensive in the 1930’s as they are now. They must be considered in the “price” of living and assume they will go up.

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4 Comments »

  1. Totally very groovy girl,
    As you know I have followed your postings for 2 or 3 years now and have a B.A in economics. No, I don´t pretend to be a qualified expert from such and such a university rolled out by the BBC.
    I´ld like to draw your attention to a few points.
    !)Martin Armstrong´s prediction of a gold high on 02/12 2014 was way out.
    2)No economic model can be accurate although they might get lucky. Modelling is about parameters and these are in essence a function of human guesswork. Think about the global warming models.
    3) What happens to the gold price is ultimately a geopolitical issue. In other words will dollar hegomony prevail or the Russian Chinese axis with other countries such as in S.America prevail.
    4)Ultimately the International Bank of International settlements which is a private concern run by the Rothschilds etc. needs a yardstick with which to measure the payments and that standard is still and will continue to be gold. Armstrong´s realisation that we will be moving to a digital economy has no bearing on the above. He is quite frankly paranoid and somewhat out of the loop, whether intentionally or not. In fact he is a very shrewd cookie who knows how to keep the money rolling in.
    Hope you´re well G.G. Miss your updates.
    Regards,
    Guy

    Comment by deshepherdhere — April 22, 2015 @ 6:44 pm

  2. Have you read this? http://www.hangthebankers.com/jp-morgan-physical-silver-hoard/ Seems like JPMorgan are going all out for silver. I don´t think it´s because they want to profit from an upcoming crash but because we are heading towards a bipolar metals based currency with the east tied to gold and the west to silver.
    Hope you´re well,
    Guy

    Comment by deshepherdhere — April 29, 2015 @ 5:50 pm

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  4. These matters can be very confusing; central bankers lie and manipulate as long as they can get away with it.

    The German hyperinflation of 1923 started with a seeming deflation. A deflation is a decrease in the supply of money, not the resulting decrease in prices in the stores. People often put away currency in their mattresses, when they are afraid for the future. A Central Banker can see this as a deflation so they print up more money.

    The Central Bankers are making it increasingly more difficult to get currency from the banks. If all your money is in the bank, then they can do a “Bail In.” Or they can start charging fees for the bank to hold your money. Then, they add fees or restrict you from withdrawing your money. If you withdraw more than $10 thousand at a time, you have to fill out a federal form. If you withdraw just less than $10 thousand, you can be accused of money laundering. So, you can’t win.

    I don’t know which way this currency crisis will turn out; it depends on decisions that the central bankers have yet to make. We have humongous amounts of debt which is ‘off the books.’ That is, out of the marketplace.

    If China were to bring their trillion dollars of US Treasury Securities to market, we would have an instant hyperinflation. It would be very foolish for the Chinese to do this, if they want to retain the value of those bonds. But, they are not our friends. What if we go to war?

    I’ve thought that it would be easier for the Central Bankers to destroy the US Dollar in a hyperinflation. That way they get to blame someone else for their problems, but they are running out of road to kick the can down.

    A hyperinflation really takes off when the people no longer will accept a currency for good or services. What will they accept instead? The currencies of the G-20 largest economies are inflating their currencies simultaneously. They are likely to fail at the same time.

    http://pair.offshore.ai/38yearcycle/#hyperinflation

    I would prefer a deflation, because that is less damaging to the economy. I just don’t believe that the Bankers will do what is good for America or the world. The more they drag this out; the more likely that a Black Swan event will occur which forces their hand.

    Comment by Louis Wheeler — November 10, 2015 @ 2:34 pm


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