patrick.net

He just said "load."

"The wad is liquid enough indeed"

Could we change the title of the thread to this?

"Jamie said “thread”. “Thread” must mean SOMETHING really lewd if you think about it long enough,"

LOL. Let me think...

"right Mr. Wad?"

I think he's Mr. Load.

"Many people park there wad in a mattress. Some have a doll with a special compartment.
Inflation can not be avoided with this tactic. With inflationary pressure, depositing your wad in the wrong place can cause a mess.."

I'm crying.

You win the award, iceman. Lewdest, crudest, funniest.

"Yes, no FEE mutual funds are pretty much what we have been doing, along with some savings"

Us too.

See there, a serious comment--I'm not a troll.

"I guess we could have just stuck to our original plan and held forever, but our original plan didn’t include each house going up over $100k in a couple years."

It sounds like a smart deviation from your original plan.

"Can one “DO” mutual funds?"

We've turned into Beavis and Butt-head.

I meant that as a compliment.

Hey I just noticed we're doing this on the wrong thread. The one before this says something about Can the Fed Prick the Bubble.

Heh.

"I’d rather gouge myself in the head with a fork"

Now THAT's kinky.

"Deflation can cause diminishing marginal utility. Inflation can cause increasing marginal utility.
This is of course if all other variables are equal and you are depositing your wad in a doll."

Could someone create a graph to illustrate this?

"Perhaps you should prick yourself in the head with Jamies “fork”?"

You did NOT just say that. (visualize buggy-eyed emoticon here)

I'm shocked. Utterly and completely.

You're the artist...

...formerly known as Mr. Prick.

Are we going to be embarrassed to show our faces here in the morning?

Hey, you're the one who decided to take the easy "fork" in the road. I chose the path less traveled by, and that has made all the difference.

But I'm sorry, I should have said "formerly known as Jack." Mr. Prick just sounded better.

"I never said your fork was easy. How dare you say mine is. Art is a hard road."

Especially if you do it in the dark! And I was talking about your fork jokes, not your art. You knew that, right?

:-P

"and what path was that?"

Tonight, apparently, it's the one through the gutter.

Oh good, and that emoticon 4 messages above was meant to evoke silliness, not lewdness. Just so the record shows... I don't want to be accused of any suggestive tongue action on this thread.

My gazillion photos have finished uploading, so I guess I should detach myself from the computer.

'Night, Johnboy--I mean Mr., um, Jack.

He He He

They said "prick" and "wad."
Among many many other things you naughty people. Damn, I missed all the fun.

What was it Prat said on another thread about "core inflation?" I think it would translate well on this thread.

I don't invest in gold as a hedge against inflation, I invest in gold as a hedge against a free fall of USD, which is my ultimate fear. Euro is not going up much because there are a bunch problems in Europe, Yen won't revalue because they simply won't, Yuan won't revalue because they cannot afford to, AUD is already through the roof, if USD has to go come crashing down, who else can bear the up pressure without destroying the economy??? The only logical answer I can reach at is gold, as a store of value.

I know it is a commodity and all that, and I know the biggest fear of all economists is to have people lose confidence in paper money and resort to precious metals or anything that cannot come off the printing machine as fast or reliant on Feds and Central bankers who don't have enough self-discipline.

I hedge inflation with my house, and the free fall of USD (which I am sure will happen at some point) with gold.

Also, both Chinese and Japanese central banks indicated earlier in the year that they would like to diversify part of their portfolio to gold. I don't think they do that for fear of inflation, they just need a better store of value than simply USD and Euro.

No, gold won't do much for you in CREATING value. You won't become rich in real terms with gold. The price of gold is always inversely related with the strength of USD, the higher the confidence in USD, the lower the price of gold (hence the gold bear in the last 20 years when USD became strengthened). Gold is simply a place to park money to make sure you don't lose much purchasing power when paper money aka USD, becomes worthless.

"Jamie should be extremely embarrassed by her actions"

I should?

Well, I promise not to make any more inappropriate comments, or comments that might be interpreted as inappropriate, for...um, a while.

Can I stay? If I behave? (But iceman should feel free to continue on with the inflation jokes. I promise to laugh silently.)

speaking of debacles, here's another:

http://tinyurl.com/bl5rm

good news for Peter!

in the harsh light of day…

Huh? Send some of that over here, it's cold and cloudy where I'm at!

Is that some exotic investment of Peter Ps?

I believe Peter had shorted TOL, perhaps a few other builder stocks?

"Jamie, you can stay, but only if you dont behave."

Must ... not ... comment.

Whew. Progress.

Of course I could just check the weather forecast! But that would be cheating.

I predict a scattered flurry of posts, with mostly gloomy economic skies, punctuated briefly by sunny bullish optimism...

In my opinion, the reason that attempting to use gold, or any other precious metal or commodity to hedge against either inflation or the USD, is because of the Dornbusch model. http://tinyurl.com/9vcdx There are just way too many variables at play, including micro currency supply-demand factors relating to reserve currency status, to accurately hedge such things except with other currencies directly (I'm excluding operational hedging which multinational companies can certainly do).

There is no distinction, in theory, between nominal interest rates (which are strongly correlated with inflation) and currency exchange rates because of covered-interest-rate-parity. This is pretty accurate for convertible, open market currencies which include the USD, EUR, JPY, GBP and many others. It doesn't include the RMB or any other fixed/pegged/banded or non-convertible currencies.

But I think a lot of inflation is MUCH scarier than a little deflation

I disagree with this.

Contentions that deflation is good (I'll use stabilizing) are based on the Pigou effect, which is a theory from the 1930s. It assumes that (1) falling prices lead to higher real-money balances, which while true in theory-land is not observed in the real economy. (2) When the real-money balances rise for households, people "feel" wealthier, and will thus spend more (this is the Pigou prediction).

This reasoning caused many economists in the 30s to believe that the early deflation preceding the depression was good, and would stabilize the economy. We know how that turned out.

In contrast, defaltion--even modest deflation-- is *known* to cause problems because of (1) debt-deflation theory. This is the thing where people with long, fixed rate loans "make" money because they're paying back in stronger dollars than the bank loaned the money out at. But debtors have a higher propensity to spend than creditors, so this cycle leads to self-reinforcing contraction (a credit crunch), which is hard to break once started without huge, costly government intervention. We broke it with New Deal spending and capital controls. The Japanese have nearly broken it with over 100% of GDP debt burden.

(2) Expected future inflation becomes negative. When consumers observe this they put off consumption decisions. When companies see this they put off investment decisions. This is also a vicious circle which is hard to break when started. A lot of this goes to Peter P's market psychology arguments.

Simply, for a *little* deflation to have any effect, it has to be *enough* deflation to cause real problems. It's not linear by any measure; there is a critical threshold which, once crossed, bury the money and start growing your own food in the back yard.

Besides, moving is a pain!

Don't I know it.

Don't worry Jack, I'll always talk to you. In fact, all this behaving just isn't as much fun as the misbehavin'.

I really know very little about gold as a hedge against the dollar. I have heard amongst the chatter that there were predictions in the 70's (I think) that gold was going to skyrocket, and it did the opposite and in fact never hit the levels that were sometimes predicted.

Is that relevant now? I don't know. But it seems interesting to me that the reactions of one bubble are often a path to another one. I'm hearing talk that suggests once people pull their money out of housing the stock market is going to have a bull run again because people will need a place for their "wad." (couldn't resist) And gold is getting a lot of talk these days, so perhaps there is another bubble in the making. More finacially educated folks than I can make better predictions, but from a view from the sidelines it's interesting to watch.

Gold is going to skyrocket! Why? The streets of the BA are paved with it.

I agree that hyperinflation is terrible; nearly as terrible as deflation. But hyperinflation is relatively easy to halt, even in the Weimar it was halted in a mere few months once there was directed fiscal & monetary intervention. (In the summer of '23 the rate was over 10,000%, by Jan. '24 it was between 0-3%, a result of the Rentenbank reforms. I studied the Weltwirtschaftliches Archiv in school.) Deflation is hard to stop, on the other hand.

I also agree that pre-modern capital markets, deflation was a natural, useful cycle, and was generally quite modest and self correcting. This is no longer true in an environment of much more perfect, less sticky capital markets. The folks who allowed the Great Depression to occur weren't just stupid, they were handed a set of events which, in their minds, should have self corrected based on historical data. But they failed to consider the massive changes that the capital markets had gone through between the 1890s and the 1930s.

There have been no examples of modest, secular deflationary cycles in the US post 1800s.

"people will need a place for their “wad.” "

(...lead me not into temptation, but deliver me from evil...)

You're right Sacto, behaving is no fun at all.

I have a question regarding "core inflation" what is in the "consumer basket"?

what is in the “consumer basket”?

Easter eggs.

"I have a question regarding “core inflation” what is in the “consumer basket”?"

I am forbidden to answer this question, for fear of wrath from, uh, Jack.

Maybe Peter P is actually the Easter Bunny.