Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: unrealistic_thoughts who wrote (27874)	3/5/2005 8:50:18 AM
From: Tommaso	Respond to of 110194

Like the Japanese, I have a pathological addiction to saving. My friends were all astonished when I actually bought a new car! The paradoxical thing is that the people who are debt free can prosper during inflation as well as prospering during deflation. If you are free of debt, you can readily acquire assets that retain their value. Many people, if they think at all, imagine that going deeply into debt to acquire material assets is the way to beat inflation--as we see in the crreunt real estate bubble. But since eventually interest rates have to overtake inflation (barring total renunciation of a currency), debtors will wind up victims of their own folly and find themselves unable to retain possession of those supposedly inflation-proof assets. In Turkey, a couple of years ago, people with ready cash enjoyed a terrific return on their money despite the equally terrific declines in the purchasing power of the currency that had occurred. Of course, it is true that those who go on acquiring real estate, perhaps borrowing temporarily to add an income-producing property, can become extremely wealthy. Some years ago I met a gentleman who had, over many years, gained ownership of thirty or forty beach houses, the seasonal rent on which financed each subsequent purchase. And a lot of people are robbed of real wealth by inflation. I think I agree with the various economists who think that with a fiat currency, deflation is extremely rare. I think that we have actually been in an inflationary period that is much more serious than shown in official statistics (the government does not even include house prices in the indices). In any case, the nuttiest view is to imagine that we can simultaneously have: 1. Economic slowdown and deflation (a fall in the general price level). 2. A collapse of the dollar, and-- 3. A big decline in the price of gold. These three things simply cannot happen simultaneously in a free economy. A suicidal totalitarian government could try to decree all these things, I suppose. If the United States government committed all its revenues to mining gold . . .no, even that would not accomplish all three of these outcomes.