patrick.net

Deflation is impossible due to the extent the economy is leveraged without creating an implosion that would dwarf 2008. Not saying I wouldn't love to see it. I think a natural deflation could be one of the fastest ways back to stable economics backed by honest money. Just saying the Fed will NEVER stop pumping, and over 50% of everyone in the US derives their income from the government.
What about that money we got this week for having kids, you going to send that back? Government spending, you going to put a stop to it? Curtail stimulus packages? No... Then inflation it is, and hyperinflation is coming. The only way things will get cheaper is if you have something to pay with that isn't backed by central bank debt notes.

Inflation and deflation are sort of Drama Queenistic when "rising prices" and "falling prices" will do.

Shortages, oversupply, weird buying surges like hoarding toilet paper or beanie babies or bitcoin, etc can cause rising prices or falling prices. Those just don't feel like "inflation" (or deflation) to me.

What I think has been happening, and will accelerate, is a decline in our living standard, - our purchasing power.

HunterTits says

"Too much money chasing too little in goods & services" is the definition of price inflation.

I think "real inflation" in general should be defined by the change in the number of hours of work at the median wage required to buy a given commodity, like a gallon of milk

So maybe milk now costs 0.25 hours of work at the median wage. If it cost 0.20 hours of work last year, then milk inflation was 25% for the year.

Patrick says

I think "real inflation" in general should be defined by the change in the number of hours of work at the median wage required to buy a given commodity, like a gallon of milk

So maybe milk now costs 0.25 hours of work at the median wage. If it cost 0.20 hours of work last year, then milk inflation was 25% for the year.

I tried to do that to death in the buildup to the financial crisis, which some friends and I saw coming. The problem I had in that exercise was in nailing down a commodity. All the commodities' prices seemed to have their own dynamics. I ruled out milk and the like because of the heavy hand of the US dept of agriculture involvement in regulation, price support, subsidy, etc.

Barrel of oil had its own dynamics of new supply coming on line over the decades and tight supplies from geopolitics. Those variations buried "inflation". I basically gave up. Instead, I had some benchmarks that I filed away in my brain and noted on my spread sheet.

benchmark 1: my parents SFH in SJ. Purchase price in August 1968 exactly 20K. Zillow market value just about exactly 1 M. That's 9.1% CAGR

benchmark 2: gallon of 87 octane gas in SJ immediately before the 1973 Arab Oil Embargo $0.25; same Arco station this morning $3.999. That's 5.8%

benchmark 3: my economy class ticket on British Airways in 1993 for open jaw trip to continent: $858. Same itinerary priced May 2018 $2080. That's 3.7%

#4: Price of SJ Mercury News in 1976 when I temporarily had a paper route: $0.10. Now: $2.00. That's 6.7%.

#5 pound of ground chuck in Los Angeles seen on a sign in a scene from 1968 episode of Adam-12: $0.69. Ralph's (L.A. chain) online ad in 2018 $4.99. That's 4.1%.

and so on

What is interesting is that for some of them, it does not take much imagination to see that the price changes have hedonic substitutions built into them, in reduction of quality.

Nobody can deny that the quality of the passenger experience for air travel has gone down a lot since 1993.

Any long time reader of the SJMN knows that they've stripped away just about all local reporting, massive firing of staff. (and yes, ad revenue went down a lot also).

Betcha the ground chuck in 1968 was of a higher quality, less franken-food-stuffed-with-chemical-farming-sh*t, more local with nation of origin labeling than what's sold in the supermarkets nowadays.

There is absolutely another credit default event coming. At the same time, inflation IS happening. The main question is, will the fed bailout the bad bets and eat the losses on a nationalized basis, and will there be opportunities at our individual levels to arbitrage the price fluctuations that will happen across industries.

So it's not deflation coming, it's deleveraging. The money supply itself will continue to grow, but the leverage ratio on top of it will shrink. For things bought on leverage, we will experience price declines. For things bought cash, or for production, we will see price increases. Wages will stagnate in the face of this.

In other words, how far will house prices or stock prices fall before inflation drives them up again? Because lets face it: the US is not going back to a commodity standard until the dollar collapses, and we re-create our monetary system from scratch.

And if that happens, what will "owning" an asset like a stock or bond look like?

'Digital dollars', 'Virtually currency' etc. creative ideas are coming from gov. Out of nothing they obviously create higher inflation. Savers get screwed again at much higher levels.

Blue says

'Digital dollars', 'Virtually currency' etc. creative ideas are coming from gov. Out of nothing they obviously create higher inflation. Savers get screwed again at much higher levels.

That's increasingly how the gov/corporation wants it, eleminating savers makes it easier for debt slavery.

NuttBoxer says

Deflation is impossible due to the extent the economy is leveraged without creating an implosion that would dwarf 2008.

your right, but that's what's coming.

As others have said, it depends on how you define inflation. I don't see it as a price event. You can't compare prices over time due to innovation and productivity. We are living in deflationary times for two reasons - real wages are not increasing (and this is the basis for all inflation) and there is no where for this excess liquidity to go to have a productive purpose - if it did we would see increases in real wages as a result. Eventually all of this fiat debt will be destroyed. I'm hoping the fed can make a soft landing but their track record is not good.

What would give us inflation? A decade long pause on immigration and letting the market determine the 10 year treasury. Neither is going to happen. Stay the course - total return is the key.

stfu says

real wages are not increasing (and this is the basis for all inflation)

It's not. The basis of inflation is an increase in the money supply. This is offset somewhat by the increase in durable assets in the market over time, which tends to be deflationary. (In a fiat system). In a non-fiat system, money is assets, assets is money. As more assets are produced, more people can have more assets. This means wealth for everyone.

How we ever got so screwed around to let the people "in charge" try to engineer themselves looking better by putting bankers in charge of a fiat currency, I will never know. Well, yeah I do, people forget easily the dearly learned lessons of history.

I dream of silver and gold currency once again.

It's just so beautiful and durable, and impossible for the banksters to create more of with just a pen and a gullible public.

They both do inflate a bit over time as more silver and gold is mined, but that's fine with me.

Patrick says

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I dream of silver and gold currency once again

Same but I think our future is gov controled digital currency.

We could still use real silver and gold with each other.

And how come this is not obeyed when it's still in the Constitution?

"No State shall make any Thing but gold and silver Coin a Tender in Payment of Debts."

Article 1, Section 10, united States' Constitution

How did the GW Bush fuel hyper inflation work out?

Patrick says

No State

There's your answer.

Patrick says

I dream of silver and gold currency once again.

It's just so beautiful and durable, and impossible for the banksters to create more of with just a pen and a gullible public.

They both do inflate a bit over time as more silver and gold is mined, but that's fine with me.

But there are some sinks for gold and silver like industrial usage. Gold mines keep high value strikes in reserve for hard times, or when the owners want to sell or need some money. Even then they might leverage or borrow against a known strike. They mine the low value ores when the price of gold is high and they can reap profits. Capital costs are high for mining. When prices go down, they don't mine as much, idling less profitable sites.

Patrick says

I dream of silver and gold currency once again.

As I said in the other thread, this is fine but there has to be a Constitutional Amendment requiring ALL Wages and Salaries to be paid in actual gold and silver, no notes, no IOUs, no 'here's a paper receipt for 20 ounces of silver deposited at the First Mises-Rothbard Bank'. Employers have to pay people's hourly or salary wages in actual physical gold and silver in their hand at least once per month.

Government is trying to spend into oblivion.

stfu says

You can't compare prices over time due to innovation and productivity.

Actually you can very easily if you use real money. A good suit in Italy still costs about the same that a comparable set of clothing did in Roman times, in gold ounces. And there is a fine dining restaurant in Europe that still give you a nice meal for the same amount of gold it cost 300 years ago.

The worthless paper has you Neo.

RC2006 says

Same but I think our future is gov controled digital currency.

Not mine. If that goes into effect, you'll know I'm dead. Life is not so precious to me that I'm willing to live in chains.

WineHorror1 says

No State

There's your answer.

Hamilton, is that you? The state is mentioned because the focus of the document was the only government that was allowed to exercise anything outlined in the Constitution. That's specifically stated at the end of the document. Feds had no power to do anything.

MisdemeanorRebellionNoCoupForYou says

As I said in the other thread, this is fine but there has to be a Constitutional Amendment requiring ALL Wages and Salaries to be paid in actual gold and silver, no notes, no IOUs, no 'here's a paper receipt for 20 ounces of silver deposited at the First Mises-Rothbard Bank'. Employers have to pay people's hourly or salary wages in actual physical gold and silver in their hand at least once per month.

No, we just need to start following the Constitution. Central banking fiat currencies are completely illegal. Just because a rigged system says their money is legal, doesn't legitimize it. In fact, that's always been the hallmark of worthless money substitutes, that a corrupt government forces their usage. If no one forced you to take dollars, they would disappear within a few years.

NuttBoxer says

No, we just need to start following the Constitution. Central banking fiat currencies are completely illegal. Just because a rigged system says their money is legal, doesn't legitimize it. In fact, that's always been the hallmark of worthless money substitutes, that a corrupt government forces their usage. If no one forced you to take dollars, they would disappear within a few years.

Oh, my law is Constitutional - you have to be paid in Gold or Silver, not a Banknote "representing a private company's promise to give you the silver which if you go to the bank, they will hem and haw and try to get you to take other paper instead of actual physical coin.".

Nope, you must be paid in the precious metal, all salaries and wages. Not paper of any kind. Corporations and Banks can trade the paper between themselves, as long as we get the actual metals, not the Wildcat Bank Script, Scrap, and Inked On Nonsense all Fractionally Reserved. They must pay all wages and salaries in the physical currency.

"Oh, this is a Banknote on the First China Bank of 88 Dragon for 10 troy ounces of Silver, you take, Wogah Wikardson, you take for your work at Numbah 10 Lucky Retail Store."
"No Cheng, I want my 10 troy ounces in Metal Silver per the law, in my hand."

Of course, this is exactly what they don't want to do. They want to keep the physical metal and give all the plebes the paper.

Only way I'll accept the Gold and Silver Standard is that it is 0% Paper/Digital and 100% Actual Metal for wages/salary.

I think deflation is on the horizon too but keep in mind we can have technology induced deflation and asset inflation at the same time.

Went to a restaurant supplies store yesterday. A lot of restaurants use this store; it is open to public. Prices of most items were significantly highly. For example a Volrath frying pan that was $40 precovid is $60 now. I imagine restaurants will pass on these costs to the consumer....but how long will this model survive?

I just spent $18 for a burger, fries and soda last night at 5 Guys.

gabbar says

I imagine restaurants will pass on these costs to the consumer....but how long will this model survive?

That's my point. I think as prices go up, people will just quit paying. I'm already seeing it in my own buying habits, as well as people I know.

joshuatrio says

gabbar says

I imagine restaurants will pass on these costs to the consumer....but how long will this model survive?

That's my point. I think as prices go up, people will just quit paying. I'm already seeing it in my own buying habits, as well as people I know.

I walked out without buying anything from the restaurant supply store. I was looking for a better olive oil dispenser; I will make do with the oil dispenser I already have, no big deal. I am not going to pay those prices for a better oil dispenser.

joshuatrio says

gabbar says

I imagine restaurants will pass on these costs to the consumer....but how long will this model survive?

That's my point. I think as prices go up, people will just quit paying. I'm already seeing it in my own buying habits, as well as people I know.

Pre-covid, I loaded up on clothes and winter clothing at Dillard's at sale prices. I am in good shape for the next few years; I see Dillards full of crappy clothing now but its stock price is above $150; makes no sense to me.

WineHorror1 says

I just spent $18 for a burger, fries and soda last night at 5 Guys.

I remember when $5 was considered expensive for a hamburger.

Booger says

WineHorror1 says

I just spent $18 for a burger, fries and soda last night at 5 Guys.

I remember when $5 was considered expensive for a hamburger.

AND I can tell there is something different about the meat. Big difference.

WineHorror1 says

Booger says

WineHorror1 says

I just spent $18 for a burger, fries and soda last night at 5 Guys.

I remember when $5 was considered expensive for a hamburger.

AND I can tell there is something different about the meat. Big difference.

And it is not a better difference I am sure......so what's going into the meat; is it even meat?

gabbar says

WineHorror1 says

Booger says

WineHorror1 says

I just spent $18 for a burger, fries and soda last night at 5 Guys.

I remember when $5 was considered expensive for a hamburger.

AND I can tell there is something different about the meat. Big difference.

And it is not a better difference I am sure......so what's going into the meat; is it even meat?

Correct. Texture and taste are different.

joshuatrio says

Simply because all I hear about on the internet/news/podcasts is inflation, INFLATION, INFLATION... When MSM is spewing one thing, haven't we learned by now to do the opposite?

I totally agree with this. The MSM is psychologically preparing the public for a reversal so that the Fed can justify mopping up all this liquidity, which we all know will cause a crash. This is how the TPTB transfer wealth from the little people to them.

Booger says

WineHorror1 says

I just spent $18 for a burger, fries and soda last night at 5 Guys.

I remember when $5 was considered expensive for a hamburger.

I used to get a burger, fries, and a soda and get change from my $1 at McDonald's.

Technology has made some things less expensive (deflation); communication comes to mind.
I ran up a $700 phone bill once with my international and “long distance” USA calls.
Today voip is free, with FaceTime, WhatsApp, etc.

The government is creating wage inflation right now; it’s paying for people to stay home, so McDonalds is offering a $200 bonus to work ($11/hr) and Target is offering $15/hour.

With wage inflation, almost everything goes up.

The government has also made real estate less available; people are not being foreclosed as they normally would be, and they are not being evicted either.

I would not be buying a house now either until the interference ends.

Silver sucks, my friend has a lot of it that he bought for $45-$50+ per ounce years ago, that’s the epitome of the opportunity cost; I was yelling at him to buy mutual funds and AAPL at the time. I made a bundle and he’s underwater.

WineHorror1 says

Correct. Texture and taste are different.

"pink slime"

Booger says

WineHorror1 says

I just spent $18 for a burger, fries and soda last night at 5 Guys.

I remember when $5 was considered expensive for a hamburger.

If you can, go rural. We went out last night with the kids and my Blackened Chicken Sandwich with fries and 5 beers (we walked) was $18. I think the total before tip was like $55 for two pizzas, tenders, fish tenders and my meal included. Service was slow because no one wants to work, but we know everyone and we are patient and also the reason for 5 beers, lol. I think 2 Tito's and soda for the wife as well. Sit down place, food made fresh.

I've given up on chains for the most part and fast foods 100%. We'll hit some up on vacations but that's about it. Last time I think I had 5 Guys was out in Bozeman. Only 2nd time. Wasn't impressed regardless of the price. I prefer to cook at home or go local where I know the food and the people cooking it. Tip well and give back to the community in a small way. McDonalds and the like are there to extract money from your community. I wish they were short staffed and not my local restaurants and bars. And yes, I know most are franchisees, but it's rare for them to be individual and not own multiple.

WookieMan says

Booger says

WineHorror1 says

I just spent $18 for a burger, fries and soda last night at 5 Guys.

I remember when $5 was considered expensive for a hamburger.

If you can, go rural. We went out last night with the kids and my Blackened Chicken Sandwich with fries and 5 beers (we walked) was $18. I think the total before tip was like $55 for two pizzas, tenders, fish tenders and my meal included. Service was slow because no one wants to work, but we know everyone and we are patient and also the reason for 5 beers, lol. I think 2 Tito's and soda for the wife as well. Sit down place, food made fresh.

I've given up on chains for the most part and fast foods 100%. We'll hit some up on vacations but that's about it. Last time I think I had 5 Guys was out in Bozeman. Only 2nd time. Wasn't impressed rega...

5 Guys used to be my favorite burger place. No longer. Won't ever go again. Yes, things are expensive in Northern Virginia. I live about 1 mile from the CIA.

WookieMan says

Last time I think I had 5 Guys was out in Bozeman. Only 2nd time. Wasn't impressed regardless of the price.

I also think that 5 guys sucks.