patrick.net

From Kitco:

Cash is king, I’m telling you guys.

Malcolm, you do not believe in that, do you? If gold had gone up, they would have said:

“Gold and silver soared Friday after Wall Street posted another big loss and forced investors to seek precious metals as a safe haven.” :)

damenace & mike_orange,

thanks for the info. It sounds like we are scaling back more to regional sourcing than global sourcing which will be disadvantageous even without peak oil, because of future geopolitical tensions which may disrupt the supply line.

Thanks to a few blogmates here, I signed on with local CSAs (community-supported agriculture) for my food supply. My motivation was primarily because they are offering organic at a much better price than Whole Foods, and my secondary motivation is to secure local food supply, so to speak. But no matter which CSA you go to, there is almost a waiting list for sure. I waited for 5 months to get on my first choice and am still on the waiting list for another one (8 months). If the Bay Area residents all decide that they want to rely on locally produced organic food, these farms will have to be armed.

But if you go down to Salinas, or inland to the east, there seems to be plenty of industrially managed farms and I don't feel it will be a problem for all of us to rely on these farms alone. If you are talking about beef supply, if you ever drive down I-5 to LA, you will know we have more than enough cows to go around, the only thing you worry about is if these cows are injected with too much antibiotics and growth hormones, they sure don't look like happy cows.

I tried my local CSA. It was pretty lousy. Poor quality fruits and vegetables in small amounts with an outrageous price. I guess it all depends.

putting a restriction on deriving securities from mortgages will make the market more sticky, possibly limiting people’s access to housing.

I do not think undue burden would be placed on access to housing, just a rational burden on loose credit. You would still will have banks, credit unions, building societies, and even builder financing. The inability to "securitizing" mortgages will result in diligence on to whom money is loaned. That diligence will not limit home access to savers wanting reasonable loans, just to speculators and overextenders.

Cash is king, I’m telling you guys

Yep. Houses, PM, gasoline, land, stocks, wages - all falling.

Interest rates - rising.

@danville,

I highly recommend two small farms, excellent quality, large quantity, I am very happy with them. They are the supplier to some top-notch restaurants in the area. I waited for 5 months to get on, and it is really worth the wait.

Another one that EBGuy recommended is Full Belly Farm, I used them for a while and found them to be rather erratic in quality, some very good (excellent baby potatoes), some lousy (corns), perhaps they were not having a good season when I was on the trial program.

I guess you just need to try different CSAs to see which one you like the most.

Headset,

I give you that, right now cash is king. USD cash also only accounts for 3% of all USD money in circulation.

Here are the two possibilities of this crisis. We get through it, then the system is pumped with billions or even trillions of USD, and we will need to deal with the impact of such pumps later.

Scenario 2 is the worst, we don't survive. Then it doesn't matter either way, we are all hosed.

USD cash also only accounts for 3% of all USD money in circulation./i

Let me propose Scenario 3 - deflation with a very long recovery period. And yes, paying off a $Trillion debt during a deflationary (or very low inflation) period will be very tough. It will mean high taxes, low services, pulling troops from abroad, decreasing size of military manpower and procurement, COLA downward on Civil Service/military pensions, and even cuts in welfare. Social Security collection age may increase.

Scenario 3 won't happen, it is basically collapse.

We are unable to pay our debt off even at today's value, if USD becomes stronger, there will be absolutely no hope of ever paying it off, period.

There won't be high taxes, everyone who makes high enough income to be captured by high taxes will flee.

Scenario 3 is war.

Scenario 3 is war.

Why would deflation lead to war, while refuting our debts via printing press would not?

because by repudiating debt, we are saving most Americans while f*cking the foreign creditors, and we have the biggest guns. Now, unless we are not careful and get into hyperinflationary situation, if we just inflate 20% a year, we can solve the problem through a consistent yet not run-away inflation.

If we do not repudiate debt, we are f*cking most Americans, and that usually doesn't bode well for our existing political structure. Expect Hitler to rise in America.

We are unable to pay our debt off even at today’s value, if USD becomes stronger, there will be absolutely no hope of ever paying it off, period.

It would not have to be paid all the way off. We have had a debt for quite some time. Deficit spending would have to be capped, and the debt would have to be paid down.

HeadSet,

We can cut spending? That is a political fantasy I will never see in my lifetime.

In fact, during depression, ALL governments increase spending to absorb the unemployed labor force. Fiscal stimulus is the last resort, and war is the most powerful way of fiscal stimulus!

From the government's point view, be it the US government or Chinese government or whatever kind of political structure, their ultimate goal is not to manage inflation or deflation, but to maintain employment to sustain social stability. Without social stability, there's no government, and the government is concerned with its own survival above everything else.

This is the period that deficit has to go UP, not down.
- Boomers, the largest block of voters, will vote away their medicare and SS?
- Unemployed (more time on hand to vote and to be politically active) will vote away social safety net?
- Lower-skilled will vote away infrastructure plans to increase employment?

In the end, the tax burden will fall on a smaller and smaller portion of the population, who happen to be the most mobile population who can expat themselves out of the country. Japan has savings to go through 16 years of deflation, news for us, we don't have savings. Japan went through deflation when the entire world was prospering, we will be stuck in a worldwide depression. Deflation simply doesn't work.

if we just inflate 20% a year, we can solve the problem through a consistent yet not run-away inflation.

Ouch!! 20%? Just bring back Jimmy Carter as a write in candidate.

I do not think we can>/i> inflate at 20%. I do not think we can even prevent deflation. If my perception is true, then OO and TOS see a revolution.

Deflation simply doesn’t work.

Deflation is never a choice. It happens despite all governments efforts to prevent it.

Peter P Says:
October 11th, 2008 at 1:48 pm
From Kitco:
"Malcolm, you do not believe in that, do you? If gold had gone up, they would have said:
“Gold and silver soared Friday after Wall Street posted another big loss and forced investors to seek precious metals as a safe haven.” "

Actually that is what they said the day before as it did go up because of the normal knee jerk reaction to buy gold in any uncertainty even when the pressures are the other way. I'm definitely not saying that Kitco headlines are consistent, or the authority, I just picked that one because like you pointed out, the trend changed in the exact way that I had said it would a day or two before because during deflation gold is a burden. It ties up money that could be used to buy something useful. If X gold buys Y stock and Y drops in price you won't leave your money in X because the same amount now buys more Y.

C&R Crap & Rectal

I see a middle area similar to the Argentina collapse. If things got REAL bad, I would still show up to work unpaid. It is not to be nice or out of the goodness of my heart. Simple answer is self preservation. I could almost count on my family and me being fed. As long as I have a warm place to sleep and a full belly, I could tolerate a lot of shit.

It happened to the Russians and Argentineans that did vital jobs for the country. Many of the businesses in Argentina had the owners flee the country and the workers still showed up to work. They took over the company and made it a collective ownership between the employees. It was nothing more than a Communist scheme on a micro level. Later when the owners tried to take it back, the courts sided with the people.

TOB,

This is an interesting line of discussion. Let's not hijack it with snide comments.

Unless, of course, your shot at OO was inside ribbing banter among friends and I missed the joke.

HeadSet Says:
October 11th, 2008 at 5:27 pm
Quotes someone
"We are unable to pay our debt off even at today’s value, if USD becomes stronger, there will be absolutely no hope of ever paying it off, period."
Answers
"It would not have to be paid all the way off. We have had a debt for quite some time. Deficit spending would have to be capped, and the debt would have to be paid down."

Inflation helps debtors. You guys are right on! That is why the government is doing all that it can to stop this slide. Stronger dollar = lower tax revenues, means all this debt is even heavier, and a stronger dollar means it is harder to borrow more because your assets are worth less. Thanks.

If we do not repudiate debt, we are f*cking most Americans, and that usually doesn’t bode well for our existing political structure. Expect Hitler to rise in America.

Interesting that you mentioned Hitler. Hitler came to power in a period of hyperinflation, not deflation.

Inflation helps debtors. You guys are right on! That is why the government is doing all that it can to stop this slide.

Of course gov wants to stop the slide. My point is that thier efforts are futile. The only way the gov could have prevented the meltdown would have been to tighten credit on the way up. Only preventing the rise would have prevented the fall.

If there is one thing I am finding refreshing is that people are recognizing lower prices mean a stronger dollar. It is amusing to see government typically saying higher prices are bad for the economy now scrambling to fight deflation. No wonder half of the people walking around are confused, it makes my head spin too.

Headset, I'm in complete agreement with you.

It is amazing what a one week drop of 18% does to the level of dscourse on this blog.

I thought the same thing, the number of posts is higher than I've seen it for a long time. Funny how people come here for a reality check.

Hyperinflation or deflation, Hitler will rise. Such a figure rises because people are concerned about the country as a going concern.

20% inflation is very bearable, especially for a country like the US with plenty of food supply. Nobody can force hyperinflation upon the US.

What china had before the communist take-over was hyperinflation. Hyperinflation in modern history only happened in two countries, Weimar Republic, and Republic of China 1948.

Lesson 1, don't name your country Republic of whatever, a bad sign.

Ironically this thread caught my attention because I've been telling myself that things will always work out in the end, but this time I see a slight but real chance that the wheels could come off. I don't think it would take very much for riots and some real upheaval. Other great societies have fallen in the past, and I'm sure that when they were falling they were in denial.

It was funny, a couple of days ago the market had lost whatever it had and the girl on the financial news was saying, "look this happened before and the market lost half its value, we're not even close to that" then over the last couple of days we've come pretty close, definitely we're on track to. LOL

Malcolm,

The mantra is "High prices are bad, unless it is houses or stocks. "

After all, anyone who is anyone already owns both, and you don't want thier net worth to fall, do you?

Cash Savers aren't anyone. They just privatize thier interest profits while socializing any losses through FDIC. Didn't pay no moneymen commissions, neither. It would be shame to see them buy a newly cheap house and not contribute half their earnings to debt service.

That sums it up. I'll use that because you're right and I can see how renters here feel bitter because the government does only seem to talk to the homeowners and the stockholders. They are a protected class, and I'm not saying that is always a bad thing, I think as people advance they should own their homes and invest in a long term sustainable way, but even I am disgusted at this reverse class warfare. I am completely disenfranchised.

Headset appears to have had a personal revelation that inflation favors debtors, meanwhile I said this at the beginning of this thread

That inflation favors debtors is hardly profound. That is a universal known and has been commented on for years by myself, Malcolm, RandyH, justme, DinOr, and many others.

I presume that next you will take credit (at the beginning of some thread, no doubt) for pointing out that solar cells usually don't work at night.

OO says : Hyperinflation or deflation, Hitler will rise. Such a figure rises because people are concerned about the country as a going concern.

I will choose to live in poverty than live under hitler.
The only problem is that most people won't think like me.
You statement could well be true.

Hey TOB : why are you so obsession with India ?

Hey TOB : why are you so obsessed with India ?

I will choose to live in poverty than live under hitler.

You can have both, you know.

There is no way our Gubberment will allow deflation.
They will try to pump as much money as they could possibly do.
The only problem is that , money pumping doesn't work when people stop believing in spending and start believing in savings.
Its like the last 10 minutes of matrix movie when neo stops believing in the B.S

The only comments are related to the illegals coming over here and being responsible for everything bad that happens.

snmr,

This sentence:
There is no way our Gubberment will allow deflation.

Is completely refuted by your next sentence:
They will try to pump as much money as they could possibly do.
The only problem is that , money pumping doesn’t work when people stop believing in spending and start believing in savings.

You sound a bit like MiSH:
Well the Fed can print, but the Fed cannot spend. In addition, the Fed cannot give money away, nor would the Fed even if it could. Finally, the Fed cannot force banks to lend or businesses or consumers to borrow.

No gov wants deflation. But doggone it, it happens anyway.

The real purpose of the Fed is to keep wages low.

I read that the savings rate was way up.

Not really going to get into that old debate, they can't be all good or all bad. I have a problem with someone breaking the law to show up but when businesses want to hire them and the quota is set to 0, I don't see how it can be a surprise that they show up. It is also a national security threat to have people just coming and going but we can extend that discussion since we are mentioning Nazis. No I'm not an advocate for illegal aliens but I'm not going to demonize someone who comes here out of desperation either. More of that reverse class warfare I was just talking about, I find it distasteful.