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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Horgad who wrote (91041)1/30/2008 3:27:20 PM
From: GST  Read Replies (2) of 110194
 
Your balance sheet is imploding and your cost of goods is soaring -- that is not deflation. An imploding balance sheet is not deflation -- it is the sound of your net worth going up in smoke. Housing is imploding. The dollar is imploding. The cost of goods is soaring. None of this is deflation.

If your balance sheet implodes and your income is stagnant, then the rising cost of goods sold will eat you alive. That is not deflation -- and it has nothing to do with deflation.

If you have a swelling balance sheet -- if it is getting bigger -- then you can use asset appreciation to offset inflationary pressures. That is why people look to assets like housing and the stock market to buffer them from inflation. That game will not work here -- at least not for housing. It might work for some asset classes like gold and possibly stocks. But for those who are house poor and who cannot buy gold or stocks, their fate is sealed -- they will be squeezed to a pulp by inflation.
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