So, what do we do?
1. Win giant lottery
2. Buy all kinds of assets to diversify as much as possible, but keep plenty of cashy money too
3. Live your life because you have enough that you don't have worry about what regular people have to do
So, what do we do?
So, what do we do?
So, if I own a stock worth $50/share today, and tomorrow the dollar deflates and has more buying power, but my stock is still worth $50/share.... where did I lose value? It seems like I gained value since my stock is traded in dollars and still worth the same number of dollars?
Now that's not saying that deflation would not have a significant effect on things like a company's cost of capital, its ability to cover its debt, the price of its goods, and ultimately its value (and price) to investors. So the price itself may come down. But at the same price, why is it worth less?
It's damn hard to spend more on retail when you health insurance costs went up 80%.
But hey, those consumer spending numbers sure looked good for the same reason!
The record high on the DOW was set December 5,2014.Five days after I made my "top" call.
Since then things have gone hill.
U.S. Stocks Tumble to Cap Dow?s Worst Week Since 2011 - Bloomberg
One of the main reasons for the declines is of course tightening credit.
- HY Credit's worst 2 weeks since May 2012
- IG Credit's worst week in 2 months
[/IMG]- Crude Carnage Contagion: Biggest Stock Bloodbath In 3 Years, Credit Crashes | Zero Hedge
Mine went up 250% in june.
Interesting. Germany is continuing to repatriate their gold from the Fed and other sources. I thought this had stopped after the initial pathetic Fed performance (5 tons returned in 2013). They just announced that they had repatriated 85 tons of gold from the Fed in 2014. Their agreement stipulated that the Fed would return 300 tons of gold by 2020, so this will be going on for a number of years yet as the Fed gets back gold that they had been leasing out to generate additional revenue.
https://news.yahoo.com/germany-repatriates-more-gold-bundesbank-100251153.html
Fractional reserve gold....... Think about that.
In your example you would indeed gain value.That said unless the company has increased in total worth(as compared to the global economy)the shares will fall when priced in a deflating currency.The company value remains the same,but if you price it in a currency that is increasing in value compared to the rest of the world the share price will fall.It is the exact opposite of pricing it in an inflating currency.It may take a time for the price to adjust,but it has to.
For a great stark example look at the Swiss stock market over the last 48 hours after the currency gained 20% when they unpegged from the Euro.
The companies where suddenly worth LESS(currency) as the currency value increased,though their value did not change.The same thing is going to happen in the USA,and already is...ill be it at a much slower rate.
That info about the ships is stunning.
Wow.
Greece no longer wants the EU 7 billion bailout package."Greek Finance Minister Yanis Varoufakis has a clear message for his European overlords of the past: “We don’t want the 7 billion euros...We want to sit down and rethink the whole program."
http://www.zerohedge.com/news/2015-...-want-7-billion-we-want-rethink-whole-program
So, in a nutshell, we're all doomed?
So, in a nutshell, we're all doomed?
No, but the stronger dollar is reason for concern, and I suspect rather than raising rates we might be in for more QE yet again.
I hope they have the common sense to not raise rates,it would only further the rush into the dollar.I also suspect we may end up with negative rates on US Treasury notes.
It's not a strong dollar per se that is concerning, but rather it is the excess liquidity demand that it represents. WHY is the dollar gaining? It's because the world is scared of other currencies and flock to the relative safety of the Dollar. Thus the higher demand for dollars, which pushes yields way down and strengthens the dollar.Just wait until the Euro actually collapses,which I think will happen in 2015.
With due respect to Smokingman, I think deflation does and will hurt the average man, just as it did during the Depression. Deflation transfers wealth from debtors to savers. Inflation punishes savers are rewards debtors.
I agree if it lasts very long or is very deep.The great depression though I do not think represents what would happen well,for what would happen in the modern world I would look at Japan.I think the US turning into a stagflation environment is much more likely than what occurred during the great depression.
The average American, sad to say, it in debt up to his eyeballs. Deflation puts downward pressure on wages too--not just consumer prices, but also producer prices. Wages are the producer price of labor.
Part of me thinks it only just that those who voluntarily assume a huge amount of debt would bear the pain of the decision and that savers would be rewarded for their prudence. I believe in rewarding good behavior and punishing bad (to the extent these are good or bad behaviors, clearly an overgeneralization).Sadly bad behavior(debt) is rewarded,and currently saving in dollar terms feels like a punishment with zirp.
But in terms of the macroeconomy, it is bad. Savers spend less than spenders (duh). If the effect of deflation is to reduce aggregate spending--as is almost always the case-- then recession is a likely outcome.I believe we are in a recession,and never came out of the one that started in 2008.GDP minus inflation,and we really have 0 or negative growth.
Sound monetary policy is a necessary but insufficient condition for economic prosperity. Increasingly, the correct monetary policy is less and less powerful to help an economy heal because the larger factors on the rampant price distortions caused by government policy (with attendant capital misallocation), as well as the welfare state programs which discourage productive behavior and economic output.