Hello Gumnam, <<… an orderly inflation, or rather orderly financial markets with inflation can be great to build up real wealth … It is really a transfer of wealth from financially naive to the savvy>>
… Yes, just as we are able to play a game well if the rules are explained to us ahead of time, and are not changed in the middle of the game. The folks who knew the rules are invariably savvy, and the rest, tough :0)
<<Of course the operative word is orderly inflation. If we have a crisis or a system meltdown, then banks and financial institutions will suffer greatly.>>
… Again yes, and my concern is that orderly will not be a word applicable to what is coming, because what went before and is happening now, namely the ballooning of the bubbles, has been and is simply too outrageous.
<<Deflationary system on the other hand offers very [few] opportunities to make fortunes>>
… Maybe, as in perhaps, but not necessarily true.
If tomorrow, Saturday, we chanced upon a copy of the Financial Times dated January 2nd, 2014, and the feature article is titled “The Decade-long Depression Is At An End”, what should we do on coming Monday?
Why am I not loaded up to the neck with resource shares if I believe, which I do, we are and will be inflating for years?
Why am I in 36% cash achamchen.com ?
Why do I not use my USD borrowing capacity to speculate on what will supposedly rise in value should my Script turn out to be the right copy?
Before I answer my own questions, let me share with you a e-mail from a cyber pal, as follows:
QUOTE
<<… What are those possible events will cause the actual collapse. What should I be looking and watching? What factors would reach the absolute max pain that collapse would be imminent in days.
I feel like the opportunity is there to load up on U$D puts or short U$D in the next 2 years. But timing and knowing when are keys …
… I plan to do the following. Tell me what I fail to consider here.
Get … loans on U$Dollar currency that will even get lower in value, so I can pay it back in U$Pesos in a few years. It all depends on how I put the funds in play - into gold, natural resources mining companies, and China/HK equities. If investment turns negative then it could be a lousy proposition, but will be paying it back in USPesos nevertheless …>> UNQUOTE
My answer to my own question, which also answers my pal’s question, is we cannot know what will happen, and we only know when we do know, when it happens, if it is not forestalled by other happenings, and so we must not make one-way bets to the extent that we cannot afford to be wrong.
Just for example, can I paint a scenario where the USD rises in value, along with everything denominated in USD?
The answer is yes.
Suppose the USD gets into a terrible mess, and was messy enough that harsh reaction from the US monetary and political authorities must be called upon to right the wrong. What can they do? Well, THEY can convince some little Euro country to decamp the Euro, or they can simply encourage some Euro opposition party to speak out against the Euro and run a political platform that promises to withdraw from the Euro. Game set and match.
Another scenario? Saudi Arabia and Venezuela blows up, Iraqi oil output expands, USD price for energy goes up, requiring more USDs be in the system.
Chugs, Jay |
