klaser, <<I dont see gold going as high as you do in the short run. I wonder if half the dollar reset is not over, with another half to come, so maybe gold $1400 in the next 5 years.>>
… Dunno, but maybe gold can hit 1,000 by year end, data dependent :0)
<<The middle class house across the street from me in Maryland goes for about $450K …>>
… appreciate the math. Two premises may be questioned, (a) we must not assume that the Brazilian Real will escape a reset by gold, along with all sorts of other fiat money, and (b) we must not assume that the fiat money monetization program in the USA will end any time soon.
<<I dont see housing going that low as the Fed can sit on short term rates and keep ARMs low>>
… That is certainly how events worked in the first round, but assuming that the same trick will continue to work necessitates the conviction that (a) wage inflation will follow housing asset inflation already ordained (however low the arm, the monthly interest still needs to be served, baring loan term does not extend to 60, 70, 80, 90, and 100 years, and assuming interest payment cannot be skipped for more than 3 months at a time), and (b) low ARM will lead to additional asset inflation that justifies lending by any reasonable financial institution and Central Bank (at some point, when the foreign CBs refuse to buy Dollars, socks and bras in the USA will zoom up in price, and folks living in USA will still be unavble to make socks for a living).
Fiat money inflation rarely work out, smoothly or quietly. They generally end up in some biblical proportioned saga.
Do download this book achamchen.com , for it is the script we are on, except this time, the “we” is the entire world. The book gives a hint on what naturally happens when folks try to inflate their sins away.
<<Of course the dollar will crash (100%reset) but they want that>>
… as usual, they do not know the true nature of what they want, and will get it rock solid hard. THEY are assuming that debt can be monetized away without consequence on standard of living per purchasing power for commodities, socks and other items of underwear. They are wrong.
<<Friedman had a recent editorial in the WSJ preparing us for this eventuality. When inflation goes up this will help wipe out mortgage debt as well as wipe out half the debt we owe to foreigners.>>
Yes but no, because once this is done, per the Argentina solution, real estate will crash, because refinancing (at USD 800 billion+ per year) will cost dearly, say 18 – 525% per Zimbabwe workout, and at that rate, no assets in the USA will escape triple waterfall re-pricing, at the margin, even as mortgage debt already incurred got ‘reset by 100%’, but few folks will have income to service new debt and ARM debt.
Folks falsely believe that the global reserve status of USD will save USA from the Zimbabwe outcome or the Argentina workout. Folks are wrong, because the USD global reserve currency status will merely drag the whole world into a Zimbabwe/Argentina conundrum, unless the world let the USA go, downward that would be, at the last moment.
We are obviously in uncharted realm for fiat currency experiment now, but only given its global nature. When fractal scaled downward to nation-state level, we have been here before, and it has never worked out for the better.
<<The US will go back to investment in industrial production>>
Not until and unless its cost is equivalent to Brazil Russia India China, and when so, globalization will have done its nasty work, equalization of cost and so of revenue, and therefore living standard. This in fact is how all fiat currency experiment worked out, for the fiat printing sinners.
I take the point that you are know Brazil?
So you must know some stories about fiat money experiments. How did those episodes end?
Now, fractal scale up those experiments and outcomes to planet-wide proportion, and prepare to enjoy the ride :0)
Chugs, J |
