(Continued from pt I)
So, what does it all mean? I’m of the opinion that there’s one way out of this mess- inflation. (I’d rather see deflation because I have positive cash flow, but I don’t have a big enough voice.) The computer has a blue screen and control alt delete isn’t responding. Someone needs to pull the plug and reformat the hard drive, but unfortunately, that would cause riots that would make LA’s look like a boxing match. Tea parties have sprung up in every major city in angst, and I wonder how many of those table pounders have unpaid credit cards or mortgage debt. Hyperinflation, I don’t know, but it does seem a little extreme. People have tended to overuse terms such as Weimar, Hitler, and Socialism these days. The market is forecasting that inflation is in the cards, and whether it’s just the speculators again, Pension funds, or countries such as China and Russia re-allocating their “Euro dollars”- we’ll never know until hindsight.
Either way, the powers that be can either let interest rates rise and cause more housing/credit fallout, or continue to buy bonds. It doesn't look like the feds aren’t doing so good a job anymore in their buying of treasuries by conventional means. Since the US doesn't really have any hard assets (commodities) like that of an Australia, Russia or Canada, inflation will give more spending power to those countries with hard assets. Are we ready to go to par on the CAD/USD again in 2009? Anybody seen Goldilocks? Inflation has consistently been the popular political choice due to it's artificial wealth effect. We all appear to be making more money on paper, but the time decay requires consistent stock market gains to keep up with inflation. Minimum wage is being hiked up but it will be factored into the price of everything before anyone in need can reap the benefits of the increase.
Oil is not reflecting the demand of the markets and is trading at a premium, but it's a hard asset and somebody is driving it up. Maybe natural gas is actually reflecting the true value of natural gas or maybe it's depressed by the short gas, long oil trade. The ratio of oil to gas is now at highs not seen in decades. What will cause the ratio to drop- oil prices falling or natural gas prices rising?
Either inflate and allow the undesirable ones-who are deep in debt- pay off their homes and continue to perpetuate the machine with credit, or let the yields on a 30 year hit double digits and cause culture shock with high interest rates.
Don’t stop the dance….. Will the “Powers That Be” take Brian Ferry's advice?
So, what does it all mean? I’m of the opinion that there’s one way out of this mess- inflation. (I’d rather see deflation because I have positive cash flow, but I don’t have a big enough voice.) The computer has a blue screen and control alt delete isn’t responding. Someone needs to pull the plug and reformat the hard drive, but unfortunately, that would cause riots that would make LA’s look like a boxing match. Tea parties have sprung up in every major city in angst, and I wonder how many of those table pounders have unpaid credit cards or mortgage debt. Hyperinflation, I don’t know, but it does seem a little extreme. People have tended to overuse terms such as Weimar, Hitler, and Socialism these days. The market is forecasting that inflation is in the cards, and whether it’s just the speculators again, Pension funds, or countries such as China and Russia re-allocating their “Euro dollars”- we’ll never know until hindsight.
Either way, the powers that be can either let interest rates rise and cause more housing/credit fallout, or continue to buy bonds. It doesn't look like the feds aren’t doing so good a job anymore in their buying of treasuries by conventional means. Since the US doesn't really have any hard assets (commodities) like that of an Australia, Russia or Canada, inflation will give more spending power to those countries with hard assets. Are we ready to go to par on the CAD/USD again in 2009? Anybody seen Goldilocks? Inflation has consistently been the popular political choice due to it's artificial wealth effect. We all appear to be making more money on paper, but the time decay requires consistent stock market gains to keep up with inflation. Minimum wage is being hiked up but it will be factored into the price of everything before anyone in need can reap the benefits of the increase.
Oil is not reflecting the demand of the markets and is trading at a premium, but it's a hard asset and somebody is driving it up. Maybe natural gas is actually reflecting the true value of natural gas or maybe it's depressed by the short gas, long oil trade. The ratio of oil to gas is now at highs not seen in decades. What will cause the ratio to drop- oil prices falling or natural gas prices rising?
Either inflate and allow the undesirable ones-who are deep in debt- pay off their homes and continue to perpetuate the machine with credit, or let the yields on a 30 year hit double digits and cause culture shock with high interest rates.
Don’t stop the dance….. Will the “Powers That Be” take Brian Ferry's advice?
