Dollar Devaluation

Have to say I'm with you. And not just to try to raise a panic. Based on the facts, you have to pick a side. There's a lot of people on this forum that will try to tell you everything's fine and since we haven't had any real severe money problems in the past few decades that this will continue. But like you, I believe the game has changed. From what I've read, the major reason inflation isn't slamming us hard now is because they've kept interest rates pegged at zero (for how many years now) and the bulk of the new money that's been created the last two years is still sitting in the banks. Like it doesn't exist yet because it hasn't hit the street. The banks have all got burned. They're going to save it and build up their supply before they start lending it all out again.

Anybody applied for a credit card lately? I've got one main card two store cards (no balances) and almost a 700 credit score across the board and I can't obtain another one! Used to be easy! It's much harder to get mortgages. The money is tied up. Once the banks get comfortable again, they will release all this money (open the flood gates). We will have major inflation and it's coming sooner than later.

Yes, you can make the argument that the money supposedly has more buying power, but at what expense? Products are being made by machines. Products are being made over-seas by people making slave wages. New variables have come into play compared to the early 20th century and before. This doesn't automatically make things 'good' for us. The result is what we're seeing now. No manufacturing, no hiring. An exploding population with not enough new jobs to accommodate all the young kids graduating college.

There will still be winners. A lucky few. Many more will have to struggle now and it's probably getting worse. A service based society has no way of surviving long term. There's no new money coming into the system anymore. The government has to create it all.

The sole factor driving the economy is consumer spending. Bush encouraged people to be patriotic by going out and going shopping. Every year at this time, yahoo runs a news article with retailers whining that consumer spending isn't as good as projected or is down. (Though I've never been to a mall that wasn't packed.)

The next day, they will run a news article on how to save a million dollars which completely negates what they were trying to get people to do the day before. We don't educated kids about money in schools, whatsoever. People get little or no education concerning money until they go through adult life and actually experience it. Retailers run adds spending billions of dollars to try to get people to spend all of their money. And they do. Then people are broke when retirement hits. But that's the way it HAS to be for the economy to be strong and continue to grow.

What we have is a very poor system set up. Inflation is not a natural thing that 'just happens'. There should never be inflation in a stable money supply. It is very complicated to compare the past to the present, and uninteresting to most. Fortunately for the government, people have very short term memories.

If Bernanke was forced to tell the truth there would be cars flipped over burning in the streets. He/They, have no other choice but to lie to everybody to keep people calm. If they owned the Titanic and were on the ship as it was sinking, they would have told people they were still going to make New York by Friday until the ice water began surrounding their feet. This is what's happening now. They have to (attempt to be, which is apparently getting harder to do) calm, even as the ship is sinking because they have no other choice.

If they told the truth, people would panic so that can't be an option, AT ANY POINT no matter how bad things get. Anybody who hasn't settled on this is being willfully nieve.

 

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Agreed...

 

I just bought a new home at the end of November and I had no problem at all getting a loan. I got a loan and didn't even have to pay a down payment! My credit score is ok, but they had to go off the lowest credit score between me and my wife, so they went off my wife's, which is in the low 600's. (I don't believe in having credit cards, thats why we don't have excellent credit). But still had no problem at all getting a mortgage at a good rate. However......

I believe everything around us is fake. We live in pretend land. From all the so called "job creation" which is mostly government jobs that WE have to pay for, to me getting a mortgage so easily, just because the government bailed them out. And I don't think anybody learned their lesson of why the "Great Recession" happened in the first place. I know that they are still loaning money out to people that potentially can't pay what they borrowed. The people who still have good jobs(which is getting lesser and lesser as I type) are still loading up their credit cards for the holidays.

I hate to be a pessimist, but when I walk into a store and hear the nice Christmas music blaring, and see all the nice holiday merchandice, and all the people rushing around filling their carts and swiping their credit cards ,and acting like everything is ok, I wonder just how long all this is going to last. It CAN'T last forever, and I fear it will all fall apart within a few years.

This ship is not only sinking, it hasn't gotten all the way past the iceberg yet. I just hope silver IS going to be worth something when the dollar is totally worthless........ or will nothing be worth anything except food and clothing? Hope it doesn't get that bad........

 

One problem with our monetary system is that everything in the economy MUST grow/increase every year.
Not straight line growth either, but ever increasing compound growth. In order to just survive, we must spend more than last year, consume more than last year, use more natural resources than last year, etc... We are on a death spiral of consuming and using up resources.
Add to that the fact that we face a shrinking population in the future due to the loss of babyboomers, and there is nowhere to go but down.

I know it might be a bit dry, but I encourage you to watch these 5 short videos that show exactly how this works and how it is a guaranteed death spiral...
http://www.youtube.com/watch?v=-oeqZVTCFzg

 

"Guaranteed death spiral!" Yes! Invest in silver, lead, and canning jars!

Seriously though, I am very worried about what kind of world my kids will be growing up in..... Watching the government argue about taxes is plain ridiculous..... Cutting taxes won't mean a thing in the long run if they don't cut their spending totally in half right now!

 

i just bought another 200 ounces of silver today ... got extremely lucky and caught the exact bottom of today's trade at $28 an ounce (off about $2.70 from yesterdays peak trade) i think it's quite possible that silver will go lower before it goes higher ... but i dont care ... i just can't get enough silver these days ... for me, this is a 10 year holding.

 

it's so strange that the fed keeps saying there's no inflation ... yet look at the price of cotton, corn, wheat, oil, precious and industrial metals, etc. ... what are they looking at exactly?

 

Well, what's the other option? What if the government came out today and told everybody to stay home, and not spend anything? They can't. Consumer spending is all there is to rely on any more. Manufacturing only accounts for a sliver.

The US consumer has been bred to consume. It's what we've grown up with since being small children. Commercials, adds, billboards everywhere. Which puts immense pressure on adults to buy everything thats out there. And nothing is ever enough. There didn't used to be so much stuff so readily available. Now everybody in the world is trying to make their fortune by taking a few bucks from everybody else.

I hear you on credit cards. But they have been a major driving force behind the consumer spending that is needed for 'fake' growth. It's all extra. Many are to the point where they need them to live on. If all cards were canceled tomorrow, what do you think would happen? Millions of people would be instantly swamped. They're just a way for individual consumers to play 'government' really. It's a way to help create a good but false economy.

Which makes hard assets that much more attractive. If anybody ever needs a real gauge on what has value...... Lets pretend a recently graduated highschool kid, that is a total stranger comes up to you and says they want you to finance their college loan. But it has to be paid in real, hard money.

Lets say the cost is your entire coin/bullion collection, plus a few rolls of $20 gold pieces on the side. You own all this material. The kid wants you to hand it over to them so they can 'possibly' graduate with a piece of paper called a diploma. Now "they promise to pay you back with interest once they get a job." Will ANYBODY on this board give those assets to a stranger so they could go to college? Would any amount of interest be worth that risk in say, 2000? 2011?

Well, then why would a bank so freely give that much money to punk kids to go to school? Sometimes hundreds of thousands!!! Why? Because as you said, it's all fake. The numbers are just typed into the computer and the kid's school is paid for. No real loss to anyone. Just a credit to the college and a loan to be paid off in the distant future to the kid, regardless of outcome.
May seem acceptable, modern and convenient to some folks here but it's not real. There-in lies the root of the problem. It's easy money for everybody because it's fake.

Quality of living has managed to go up because everything is mass produced as cheaply as possible, imported from over-seas, manufactured for slave wages in plants with no regulations, or is government subsidized in some form. Think about that. It applies to almost everything you can think of.

Everybody in the US is left fighting for government or service jobs so they can buy the cheaper (but unending) list of goods and services. Only the wives don't get to stay home anymore. Need the extra income to keep up or in some instances, just to stay afloat. Now, everybody has to be employed from a smaller job pool. One bread-winner isn't enough. So has quality of life really improved and the dollar kept pace? (AC sure is nice in the summers.) But IMO, it's just changed. Not necessarily for the better. Unless people enjoy time spent at work.

 

Hit the nail on the head with this one.

 

The problem is, in this system that we have grown to love, there is no answer to this but to let the bubble finally burst so we can hit rock bottom so we can work our way up again. That's a whole lot easier said than done, and at this point, when the bubble does burst, which it will at some point, it will be very hard on almost everyone.

Most people don't know really what hard times are and everyone is so use to getting what they want overall, that I think some people and obviously our government thought throwing billions at the problem was well worth the risk so people can stay in pretend land. Well, like with so many other things, wildly throwing money at a problem usually doesn't fix the problem.

Our economy MUST have ups and downs to correct itself, and it badly needed corrected and we didn't let it.

 

Welcome to the matrix.


I wonder what happens when such a large portion of society defaults on loans... ???
I think the problem with housing is far greater than portrayed.
Are we going to just let banks forclose on 2/3 or 3/4 of all houses after the huge money they got for bailouts?
Why do they get bailouts and not the people? Why should the people get bailouts when other people did get one or need one?
Who's to make all these decisions when the bottom finally comes?
Who takes the loss in the end? Banks, people, nations, one nation in particular, or industry... I think it will probably be 'freedom' that takes the biggest hit.

 

Freedom... yes. The government thinks it can spend YOUR money better than you can.... As long as this train of thought continues, and it has for some time, our freedom, and our dollar will flounder.

 

By any chance, do you have any recommendations in regard to "performing assets." I have not thought of silver as non-performing. I like silver at 5.00 dollars and ounce and I like it at 30.00 an ounce. Frankly, spot price has very little to do it. Like others, I lke coins. I am not sure if I agree with the idea of being "non-performing" asset wise, but then I might not understand the expression. If you could explain it, it might help me to contemplate your contribution to my benefit.

I get the bubble part. I feel like it could be a long way off (unfortunately for the world's sake).

 

Congratulations on your purchase. That is really cool. I have only picked up 12 ounces this past week. My price in was higher that yours, but that is oK with me. It is my first purchase of bullion in a while. Anyways, good for you. 200 ounces is something to be proud of.

My goal for next year is 100 ounces of silver, and 3 ounces of gold. Even if I meet these goals at 50% or 25%, that will still be doing good.

 

http://www.thenational.ae/business/economy/gcc-urged-to-boost-gold-reserves

Here is a nice little read. Not sure if this is best thread to attach it to, but hope you all might be tolerant. I am open to feedback if someone wants to recommend another thread. I did not wish to start a new one.

(BTW, the article uses some terms I am not familiar with).
Enjoy.

 

An index overly weighted by Housing. The housing offsets all the inflation of basic necessities.

 

Yet they dont realize that housing was never allowed to fully correct in the last housing bust ... it's been artifically propped up for 2 years (artifically low mtg rates, tax breaks for home buyers, freezing of foreclosures, etc) it's no wonder house prices are still falling slowly.

I know that my house value was pretty stable around $130,000 for 12 years from 1990 to 2002 (i bought it for $107,000 in 1986) ... then it shot up to $360,000 at the peak in 2006/2007 ... now it's only back to around $260,000 ... it seems to me that there is still some air in that price.

Also the sale of distressed houses (foreclosed homes on the books of banks) is going to act as a drag on the market for a while.

I dont understand why the FED doesnt include FOOD and ENERGY in their inflation computation ... those are two big expenditures for every living breathing adult.


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Hi wl,

aaaaarrrgggh. They've changed the formulae used to calculate various gov't stats. This particularly includes the CPI.

For example, housing makes up 20% of the market basket. Housing's been flat for since the real estate meltdown so that's a drag on the CPI . . . but it's get better. They use a Rental Equivalent rather than owned houses so they missed the entire real estate boom.

Also, they use Hedonic Adjustments. Yeah, I know but it's neat. This means that if the product is New and Improved, they can charge more and the price increase is not considered inflationary. Oh, this makes sense but ONLY if I can still buy the old and unimproved version. When I traded in my 2000 Montana for a 2005, it was 5K more for things I didnt' want or need, but were part of the package. feh.

Lastly, flat screens and computers are helping to defray the increases in commodities - which don't show up in the CPI but have to work their way thru the entire production process.

If you're curious about how badly we're being screwed, go to:

http://www.shadowstats.com/

It's a web site run by John Williams where he recalculates the primary gov't stats using the formulae they used when Reagan was President. Inflation's really about 8% and Unemployment is about 22%.

what's in your pocket?

peace,

rono

 

This thread sure has turned into a regurgitation of thoughts from various fringe website postings from the last few years! Just keep in mind that most of these articles are written by folks with little or no economic training who merely parrot each other in order to sound profound.

 

I recommend this book.
http://www.amazon.com/Nickel-Dimed-Not-Getting-America/dp/0805063897