patrick.net

Misc says

No, inflation is a way out for a borrower.

Is that why the national debt has grown pretty much every year since world war2 we must need more inflation then!

PeopleUnited says

we must need more inflation then!

And boy are you going to get it.

HeadSet says

Zak says

The kind of run I'm talking about is where 25lb bars (400 oz) are sitting in a vault, and the depositor comes calling. A 25# bar of gold is 400oz x $2000/oz = $800,000.

,
Your point is valid, but I have a picky detail. Gold is measured in troy weight, and a troy pound is 12 troy ounces, with a troy ounce being 1.097 standard ounces. That common 25lb troy gold bar would actually be 300 ounces, not 400, so only worth $600,000.

gah.. yup always forget troy vs standard. it's my weight math that is bad though.. the standard gold bar is 400 troy oz: https://en.wikipedia.org/wiki/Gold_bar, so still $800k

I just think it is hilarious that sheeple actually believe that inflation is good.

But then again people still think wearing a face diaper is good, so....

Misc says

Charging interest on a commodity based system doesn't work. I will let you do the math for a single ounce of gold compounded at a 3% interest rate for say 2000 years

I think I've replied to this particular line of fouled thinking before, right? https://patrick.net/comment?comment_id=1899881

Also, interest is due from a person. It's one thing to have a number on a piece of paper. It's another thing to collect it.

What happens to loans that can't be paid back? They are not paid back!

Lets try it. Send me a 1 oz gold coin, and I will accept a note to pay you back at 3% interest in 2000 years. Or lets try this instead. Send me one gold coin and one platinum coin, both at 3% interest, sum total due in 2000 years, and we will see which metal generates you the better return as the prices fluctuate in dollars!

Reality says

Price inflation (especially rapid) is what people dislike.

Lol! I think you may be a little bit under the spell of modern economics. In 1971, an ounce of gold was about $40. 52 years later, those $40 buy you about 1/50th of an ounce of gold. Hope no one is stuffing dollars under their mattress to create a fund for their grandkid! I guess a good old fashioned ounce of gold would have been ok though.. huh?

Inflation of the money supply IS inflation of prices.

PeopleUnited says

I just think it is hilarious that sheeple actually believe that inflation is good.

If you are high debt type with big mortgage and big car and credit card debt, inflation is good for you. It may turn out that the debt boys were the smart ones, if we do in fact have double digit inflation.

Misc says

Since there is no way for you to refute that charging interest on a commodity based system leads to anything but the systems collapse, I will consider this a win.

This is not about lose or win, it's just entirely mathematical.

Look, let's say I'm a bank, and I only have 1 customer - you, and I loan 100 credits to you at 10% interest at year, and you are required to pay it back in 1 year. It can be paid back, if I give you an extra 10 credits to landscape my lawn over that year. This works with even a commodity standard of X which X cannot be mined or created.

The banking system is parasitic, it doesn't want to kill host but if the credits can be created at will, I don't even need you to pay me back.

If I'm a central bank, do I need to worry about taxation, or even work? I'll just dump "money" out of my printing machine.

That's fiat money. They have infinite wealth.

HeadSet says

If you are high debt type with big mortgage and big car and credit card debt, inflation is good for you.

If you work for a living, debt and inflation are your slave masters. They both crack the whip on your back and force you to work while the powers that be sit on their asses and reap the benefits of your labor.

If you work for a living and are in debt, deflation would reduced your wages until you could not make payments and you would lose whatever you went into debt to obtain.

The people with the assets would sit back and collect it all.

Reality says

Misc says

inflation is a way out for a borrower.

First of all, the biggest borrowers are not those taking out home loans, but the banks themselves: their action of taking deposit is borrowing.

More importantly, it's not inflation itself that helps borrowers (as lenders would charge higher interest rate when both sides expect higher inflation), but the difference between inflation rate during loan service vs. inflation expectations when the loan interest rate was set. That's where artificially manipulation of interest rates by monopolistic banksters really rip off the general population: just look at the millions of people who took out loans to buy houses at or near market peaks due to fear of run-away inflations (FOMO, "now or never"). There are always more people buying at the peaks than at the bottoms (that's how peaks and bottoms are formed). Left to a free ma...

Property transactions today are at a generational low. By your logic this would be an ideal time to buy as this would signal a trough in prices. I would not recommend this course of action.

Reality says

Misc says

inflation is a way out for a borrower.

First of all, the biggest borrowers are not those taking out home loans, but the banks themselves: their action of taking deposit is borrowing.

More importantly, it's not inflation itself that helps borrowers (as lenders would charge higher interest rate when both sides expect higher inflation), but the difference between inflation rate during loan service vs. inflation expectations when the loan interest rate was set. That's where artificially manipulation of interest rates by monopolistic banksters really rip off the general population: just look at the millions of people who took out loans to buy houses at or near market peaks due to fear of run-away inflations (FOMO, "now or never"). There are always more people buying at the peaks than at the bottoms (that's how peaks and bottoms are formed). Left to a free ma...

Property transactions today are at a generational low. By your logic this would be an ideal time to buy as this would signal a trough in prices. I would not recommend this course of action.richwicks says

Misc says

Charging interest on a commodity based system doesn't work. I will let you do the math for a single ounce of gold compounded at a 3% interest rate for say 2000 years.

It eventually leads to default in a commodity based system, on and off. There are ALWAYS bankruptcies in a commodity based system.

With a fiat system, it ALWAYS leads to inflation. In a purely fiat system, if a Bank loans out $1,000 to 1000 people, and charges 1% interest on everybody and loans it for a year, how is it possible for everybody to pay back the loan at the end of the year? Everybody will own $1010 at the end of the year. So how do you prevent a default in this system? Well, the bank creates $10 for each person, and uses that to buy goods and services from everybody. There can STILL be defaults, but it's not guaranteed.

The reason the US target inflation rate is 2%, is that ...

I would prefer a situation of inflation rather than deflation. Especially when financing something like a house over 30 years. With inflation the rising wages would cause the payment as a percent of income to be lower and lower each year. Whereas, with deflation the payment becomes steadily more unbearable.

Reality says

Misc says

inflation is a way out for a borrower.

First of all, the biggest borrowers are not those taking out home loans, but the banks themselves: their action of taking deposit is borrowing.

More importantly, it's not inflation itself that helps borrowers (as lenders would charge higher interest rate when both sides expect higher inflation), but the difference between inflation rate during loan service vs. inflation expectations when the loan interest rate was set. That's where artificially manipulation of interest rates by monopolistic banksters really rip off the general population: just look at the millions of people who took out loans to buy houses at or near market peaks due to fear of run-away inflations (FOMO, "now or never"). There are always more people buying at the peaks than at the bottoms (that's how peaks and bottoms are formed). Left to a free ma...

Property transactions today are at a generational low. By your logic this would be an ideal time to buy as this would signal a trough in prices. I would not recommend this course of action.richwicks says

Misc says

Charging interest on a commodity based system doesn't work. I will let you do the math for a single ounce of gold compounded at a 3% interest rate for say 2000 years.

It eventually leads to default in a commodity based system, on and off. There are ALWAYS bankruptcies in a commodity based system.

With a fiat system, it ALWAYS leads to inflation. In a purely fiat system, if a Bank loans out $1,000 to 1000 people, and charges 1% interest on everybody and loans it for a year, how is it possible for everybody to pay back the loan at the end of the year? Everybody will own $1010 at the end of the year. So how do you prevent a default in this system? Well, the bank creates $10 for each person, and uses that to buy goods and services from everybody. There can STILL be defaults, but it's not guaranteed.

The reason the US target inflation rate is 2%, is that ...

I would prefer a situation of inflation rather than deflation. Especially when financing something like a house over 30 years. With inflation the rising wages would cause the payment as a percent of income to be lower and lower each year. Whereas, with deflation the payment becomes steadily more unbearable.PeopleUnited says

Misc says

No, inflation is a way out for a borrower.

Is that why the national debt has grown pretty much every year since world war2 we must need more inflation then!

Would you rather a default rather than more debt?

Tenpoundbass says

RWSGFY says

People seem to be implying that there wouldn't be inflation if dollar was still linked to gold.

Rent would be $20 but you would have to suck a lot of ass to get that $20.

There was inflation prior to getting off the gold standard.

PeopleUnited says

HeadSet says

If you are high debt type with big mortgage and big car and credit card debt, inflation is good for you.

If you work for a living, debt and inflation are your slave masters. They both crack the whip on your back and force you to work while the powers that be sit on their asses and reap the benefits of your labor.

Wasn't the Great Depression basically a bout of severe deflation? I don't remember accounts of people being very happy about it.

PeopleUnited says

HeadSet says

If you are high debt type with big mortgage and big car and credit card debt, inflation is good for you.

If you work for a living, debt and inflation are your slave masters. They both crack the whip on your back and force you to work while the powers that be sit on their asses and reap the benefits of your labor.

Not for Joe Howmuchamonth. Joe stretches to buy a home on a 30 year mortgage. Then Joe stretches again to buy a car on a 7 year loan. Inflation kicks in. Now Joe sees his nominal wages rise along with the price of his house. The house and car are on fixed rate loans. In 10 years, Joe has a "cheap" monthly mortgage and a paid for car he can trade in to offset the inflation on new cars. I myself am a saver and have not had a residence mortgage since I paid off my first house early, but I recognize the situation of inflation helping the high debt folks.

Misc says

If you work for a living and are in debt, deflation would reduced your wages until you could not make payments and you would lose whatever you went into debt to obtain.

The people with the assets would sit back and collect it all.

What are "people with assets?" The savers who did not take on excessive debt? It would be good to see their savings actually worth something and not inflated away to bail out irresponsible borrowers.

HeadSet says

Misc says

If you work for a living and are in debt, deflation would reduced your wages until you could not make payments and you would lose whatever you went into debt to obtain.

The people with the assets would sit back and collect it all.

What are "people with assets?" The savers who did not take on excessive debt? It would be good to see their savings actually worth something and not inflated away to bail out irresponsible borrowers.

The people with assets would be those with inherited wealth. .

As many are finding out today, it is difficult to save when rent is 50% of your pay.

HeadSet says

If you are high debt type with big mortgage and big car and credit card debt, inflation is good for you. It may turn out that the debt boys were the smart ones, if we do in fact have double digit inflation.

Debtors often need to roll over debts through refinancing. High inflation expectation would result in high interest at the time of debt roll-over, which is exactly why many ponzi businesses are in trouble now.

Misc says

If you work for a living and are in debt, deflation would reduced your wages until you could not make payments and you would lose whatever you went into debt to obtain.

The people with the assets would sit back and collect it all.

Correction: it's not the people with assets (often having to borrow to acquire the assets) but the people with banking privileges that can sit back and collect on money that they never had (i.e. created out of thin air). It is a fraud, arbitrarging political privileges pretending they had the money to lend to you (either for acquiring assets thereby driving asset prices sky high, or for consumption thereby driving up CPI).

Misc says

Property transactions today are at a generational low. By your logic this would be an ideal time to buy as this would signal a trough in prices. I would not recommend this course of action

You are confusing volume vs. price. Volume peaks often coincide with turns in price direction, whereas volume troughs usually doesn't signal much of anything. Basic charting / technical analysis. Please do not put words in my mouth; thank you. It usually takes time for people to go through the 5 to 7 phases denial through acceptance. The first period of low volume is usually result of denial on the part of people who recently bought.

Misc says

I would prefer a situation of inflation rather than deflation. Especially when financing something like a house over 30 years. With inflation the rising wages would cause the payment as a percent of income to be lower and lower each year. Whereas, with deflation the payment becomes steadily more unbearable.

The real issue is not inflation vs. deflation, but inflation-expectation at the time of purchase (loan rate set) vs. subsequent reality. If you buy at the time of high inflation due to FOMO, then deflation hits, you the buyer is completely screwed. That's precisely what happened in 1928 to the speculators of Florida swamp land real estate, to the 2005-2007 subprime buyers, and most likely to the FOMO buyers between 2019-2022. The real problem with Fiat Central Banking is that "subsequent reality" is a loaded dice manipulated by bureaucrats who are usually bought and paid for by the banks. That's why we saw government officials encouraging people to buy houses between 2005-2007, and stocks between 1997-1999, near the peaks, so that insiders could unload as the FED extended those bubbles, while roping in the masses, exacerbating wealth polarity.

RWSGFY says

Wasn't the Great Depression basically a bout of severe deflation? I don't remember accounts of people being very happy about it.

The Great Depression was the result of FED forcing inflation between 1926-1928 trying to extend the bubble of the "go-go 20's," so that insiders could unload onto the masses.

Misc says

The people with assets would be those with inherited wealth. .

False. The overwhelming majority of American billionaires are still self-made. We are not in a purely socialist economy yet, where the wealthy and privileged indeed get their power from inheritance, like the Clintons kids, Gates III, Buffets, Bidens, etc..

As many are finding out today, it is difficult to save when rent is 50% of your pay.

Most people don't pay 50% of their income into renting a house/apartment. Those who do are usually facing results of Section-8 subsidies driving up demand city combined with regulations capping supply. Ironically, a lot of middle class and upper middle class living on the two coasts do have to pay 50% or more of their income into "rent": income taxes at federal, state and local levels combined, i.e. a rent for being alive collected by the now largely hereditory political class.

Reality says

RWSGFY says

Wasn't the Great Depression basically a bout of severe deflation? I don't remember accounts of people being very happy about it.

The Great Depression was the result of FED forcing inflation between 1926-1928 trying to extend the bubble of the "go-go 20's," so that insiders could unload onto the masses.

But then deflation kicked in, didn't it? Deflation is good, right? Why nobody was happy about it?

HeadSet says

Not for Joe Howmuchamonth. Joe stretches to buy a home on a 30 year mortgage. Then Joe stretches again to buy a car on a 7 year loan. Inflation kicks in. Now Joe sees his nominal wages rise along with the price of his house. The house and car are on fixed rate loans. In 10 years, Joe has a "cheap" monthly mortgage and a paid for car he can trade in to offset the inflation on new cars. I myself am a saver and have not had a residence mortgage since I paid off my first house early, but I recognize the situation of inflation helping the high debt folks.

Depending on whether the debt is fixed-rate over a very long time period, and whether the subsequent inflation reality exceeds the inflation expectations at the time of purchase/loan-interest-setting. People who chase inflation in asset prices often find themselves to be bag-holders. Also, to the extent that people consistently find borrowing to buy anything is advantageous, that in the long run results in society-wide capital-destruction: many companies would run ponzi scams based on hoarding instead of developing real technological advance or business method improvement. To some degree, that's precisely what's been wrong with the single-family residential housing market and even more so the condo market over the past 30+ years. Think what the "iBuyers" were in reality: FOMO inflation chasers trying to flip to even more gullible FOMO buyers, and their own buying drives the bubble to even higher heights than otherwise would be, essentially ponzi scams selling to home buyers and stock buyers.

RWSGFY says

Reality says

RWSGFY says

Wasn't the Great Depression basically a bout of severe deflation? I don't remember accounts of people being very happy about it.

The Great Depression was the result of FED forcing inflation between 1926-1928 trying to extend the bubble of the "go-go 20's," so that insiders could unload onto the masses.

But then deflation kicked in, didn't it? Deflation is good, right? Why nobody was happy about it?

LOL! Do you blame the hang-over in the morning on stop-drinking? or is it because the alcohol drinking before it causing the hang-over?

Reality says

Misc says

Property transactions today are at a generational low. By your logic this would be an ideal time to buy as this would signal a trough in prices. I would not recommend this course of action

You are confusing volume vs. price. Volume peaks often coincide with turns in price direction, whereas volume troughs usually doesn't signal much of anything. Basic charting / technical analysis. Please do not put words in my mouth; thank you. It usually takes time for people to go through the 5 to 7 phases denial through acceptance. The first period of low volume is usually result of denial on the part of people who recently bought.

I am not putting words in your mouth. You stated:

" There are always more people buying at the peaks than at the bottoms (that's how peaks and bottoms are formed). "

I am pointing out the fallacy of this statement.

RWSGFY says

Reality says

RWSGFY says

Wasn't the Great Depression basically a bout of severe deflation? I don't remember accounts of people being very happy about it.

The Great Depression was the result of FED forcing inflation between 1926-1928 trying to extend the bubble of the "go-go 20's," so that insiders could unload onto the masses.

But then deflation kicked in, didn't it? Deflation is good, right? Why nobody was happy about it?

Inflation was artificially induced by the Federal Reserve extending out credit, this forced people (mostly the poor) who didn't want to use credit, to use credit, when nearly everybody was in debt, they withdrew that credit. The poor lost their assets, the wealthy kept theirs, because they were alerted to the artificial withdrawal of credit.

It's a completely artificial system. It's not a free market at all.

What bankers that engaged in mortgage fraud went to jail, or lost their money in 2007? ICELAND put their bankers in jail, seized their assets, and they did JUST fine.

The Fed is just an organized crime syndicate. The control money creation and destruction, they could drive down housing prices to $10,000 for a mansion if they wanted.

Misc says

Reality says

Misc says

Property transactions today are at a generational low. By your logic this would be an ideal time to buy as this would signal a trough in prices. I would not recommend this course of action

You are confusing volume vs. price. Volume peaks often coincide with turns in price direction, whereas volume troughs usually doesn't signal much of anything. Basic charting / technical analysis. Please do not put words in my mouth; thank you. It usually takes time for people to go through the 5 to 7 phases denial through acceptance. The first period of low volume is usually result of denial on the part of people who recently bought.

I am not putting words in your mouth. You stated:

There are always more people buying at the peaks than at the bottoms (...

There are always more people buying at the top than at the bottoms (for both price and volume; volume is self-evident / definitional/totalogical, so the statement is only meaningful for price and that is also observable). That statement doesn't mean every volume trough is a good buying opportunity. Price peaks are usually formed by all the fools rushing in creating massive volume spike; price bottoms usually involve a bottom-building process by experienced investors ("stronger hands") who are willing to take the risk catching (what previously had been) falling knives and can still generate profit from operations even if the asset price keeps dropping, so it is not a volume trough per se, but usually a volume increase (accumulation pattern) compared to the recent way down but not quite as high volume as at the price top.

Hate to break this to you, but the peasants just pulled off the heist of the century against the bankers and their "controlled" apparatchiks at the Fed.

Low interest rates drove a massive increase in homeowners seeking refinances, doubling from 7.1 million applications in 2018 to 15 million in 2020.

... and about 25% of homeowners refinanced in 2021.

They locked in rates of about 3% for 30 years. Short term rates from the Fed are about 4.5% now.

About $2.6 trillion of these low rate mortgages are on the Fed's balance sheet. The rest are held by other "criminal" banks paying their customers more than they are getting in interest from this.

For people out to rule the world, they are going about it in a peculiar way.

Looks like that "fear of missing out" went the other way.

The artificially low interest rate drove up the prices (loan size) for buyers and refinances that had a cash-out component. The banks were not losing money by offering a lower interest rate so long as they are allowed to extend-and-pretend "hold to maturity" or sell the loan off to others; on the contrary, they were making money from refinance fees before selling off the loans to other ponzi scams that suck in retirement and pension funds. The heist was against retirement fund account holders and pension fund account holders.

Now the borrowers on low interest rates are locked in, unable to sell and relocate.

richwicks says

The poor lost their assets

But earlier in the thread somebody said that deflation is GOOD for working people w/o assets. Why these types weren't happy during high deflation either?

Eric Holder says

But earlier in the thread somebody said that deflation is GOOD for working people w/o assets. Why these types weren't happy during high deflation either?

Were you not happy when PC price dropped from $10,000 in 1980 to $500 in 2000? or not happy when functional cellphone with a big touch screen dropped from $1000 in 2000 to $150 today? Mild deflation is what brings improvement in standards of living for the society at large. The deflation between 1929-1933 was not a mild deflation but a massive crash that had loans attached to the assets. The problem was the loans and the manipulation of loan interest rates and collateral values. If banks didn't exist to extend loans to buy real estate, and there was no margin loans for stock trading, the pain would not have been nearly as much.

Misc says

They locked in rates of about 3% for 30 years. Short term rates from the Fed are about 4.5% now.

All this is going to result in is that the next generation will never be able to buy a home.

Good job!

Bankers will own everything in time.

Eric Holder says

But earlier in the thread somebody said that deflation is GOOD for working people w/o assets.

It is, provided they don't lose their jobs.

Putting everybody into debt makes then subservient to the whims of the Federal Reserve.

Who are the morons that claims "Deflation" is bad?

Today that would simply mean the correction on the artificial inflation created from the Bush Gas and Oil manipulation, the RE manipulation, the Banking collapse of 2008, every Hurricane and disaster price pressures, the Food shortage inflation the intentional stoppage of manufacturing and hard goods. All of which is firmly now baked into our economy with no intention of ever being self corrected if the Fuckers that brought us these manipulated inflation(that they flat out ignore!) have anything to say about it.

There's a hard correction coming and is long over due, the elite know it, and is why they are fighting like hell, gaslighting every American non middle class entity in the Universe to fight against it. These cretins are convinced that they are entitled to these inflated gouged prices, and the POCs are under the understanding that as long as cost of living is beyond their means. Then they will get every 6 figure government job out there, and still get their section 8 stipends and other Entitlements.
These worthless fucks would gladly work for Company script.

richwicks says

Eric Holder says

But earlier in the thread somebody said that deflation is GOOD for working people w/o assets.

It is, provided they don't lose their jobs.

Wait, so deflation causes job losses and increase in unemployment? Because if it doesn't why would losing a job be a problem? Just get another one, amirite?

Reality says

The artificially low interest rate drove up the prices (loan size) for buyers and refinances that had a cash-out component. The banks were not losing money by offering a lower interest rate so long as they are allowed to extend-and-pretend "hold to maturity" or sell the loan off to others; on the contrary, they were making money from refinance fees before selling off the loans to other ponzi scams that suck in retirement and pension funds. The heist was against retirement fund account holders and pension fund account holders.

Now the borrowers on low interest rates are locked in, unable to sell and relocate.

These were refinancings on properties that were already purchased. The banks are losing money on them because they are paying a higher interest rate than they are receiving on their "hold to maturity" assets. If they sell the loans off to others, they take their loss now all at once. Retirement and pension funds stayed away from these MBS (instead they are more into high yield ponzis). Nope, it's the financial institutions and the Fed itself who are the bag holders. The borrowers are not "locked" in they can sell and/or rent as they please unless prices drop below what they paid for the homes many years ago.

richwicks says

Misc says

They locked in rates of about 3% for 30 years. Short term rates from the Fed are about 4.5% now.

All this is going to result in is that the next generation will never be able to buy a home.

Good job!

Bankers will own everything in time.

Not at all. Wages can increase until people can afford the new homes to be built.