Episode-1732- What Would The End of Inflation Look Like — 11 Comments

  1. “Every person in debt will suffer greatly in a deflation economy”

    Yep. and since most (I would say 75-85+%) of people in the west are in lots of debt this is the most important point of your talk today Jack.

    • The terrible consecuence from deflation when a large portion of the population is servicing dept with a government check (deserved or not is inconsequential) that is likely to be reduced or discontinued (think food stamps and other aid) will result in violence.

  2. Not to mention the Consumer Price Index lie where it isn’t going up (or the earned Soc Sec, Military retirements and VA Compensation) because inflation happens except when inconvenient for the Govt.

  3. @Jack – I just wanted to say this episode was excellent. You talked about a number of side effects to deflation that I have never considered. Thanks man!

  4. Great episode. I’m 39 years old and just got out of debt (all but my mortgage). Ready to start saving big time for retirement. But where do you go to get a return without risk of losing half of your money? This seems like a shitty time to be a small-time, dollar-cost-averaging type of investor. With what I’ve learned over the past few years about the risks to our economy, just blindly putting money into mutual funds every month doesn’t seem like the way to go.

    • After listening to this I had a true epiphany. I am a cpa with lots of older clients who saved all their lives and planned to retire on the investment return. They have been going nuts trying to find YIELD, buying stuff that is almost guaranteed to give them loss of principal.

      I now tell them to leave some of it in the bank and not worry about the interest rate so much. That money is increasing in value every year as deflation occurs! The true return on their savings is much greater than the stated interest rate!

  5. Great episode, I never thought hyper-inflation was possible cause our current inflation model was caused by debt purchases not cash purchases and when borrowing is restricted due to more stringent loan standards and poor income levels, mild to hyperinflation would be near impossible.

    As far as resetting our currency values, why not look at a more global picture. With the Yen, Yuan, Euro, and Ruble all losing confidence, all the global elite have to do is to is to devalue to the american dollar, lose it’s currency of choice status and create a global currency for the good of all, as suggested by them. I’m sure the IMF and SDR’s would be willing to oblige.

    Remember, they take baby steps and before ya know it, you’re that frog in the pot.

  6. I’ll go further and say 99% we are headed for a deflationary depression. Get out of ALL debt now folks IMO.

  7. To restate something:

    w/ Inflation – Time
    Things bought outright become MORE expensive over time (food, clothing..)
    Things bought with credit (housing) become LESS expensive over time

    w/ Deflation – Time
    Things bought outright become LESS expensive over time
    Things bought with credit become MORE expensive over time (So a house is ‘less expensive’ when you buy it, but the payments become BIGGER relative to income, over time)

    ‘expensive’ is ‘relative to income’

    Jack may have mentioned this, but wages will FALL in a deflationary economy. IME wages never rise as fast as inflation and I’d speculate they’ll fall FASTER than overall price deflation.

    Take a look at ‘The Seneca Cliff’ for more info on this.

    There’s kind of a simple explanation for this: companies can control what they pay their employees, but they can’t control what the market will pay for their product.

    The ‘What To Do’ portion of this is the same regardless of the future we end up in:
    0 – Make a ton of $ NOW (unless we get another inflationary boom, its easier to make money TODAY than it will be in the future)
    1 – Get rid of debt NOW
    2 – Save a crap load of money NOW

    For those of you wanting to buy property, there is going to be a TON available as the boomers start selling off their stuff to downsize/retire. At bargain prices, as too many of them try to sell at the same time and/or die (in my area at least, heirs have houses on the market the day after the will is read).

    But IMO (REALLY IMO) you’re going to be better off being able to buy something outright.

    Guessing here, but I tend to believe the future will be MORE chaotic than the present. More chaos = more risk = higher interest rates = higher hurdles for borrowing.