Found  Zero

More About: Economy - Economics USA

Deflationary geniuses abound.

A slew of economists, researchers and brainiacs are talking about deflation as if it's the ultimate indicator of whatever we're going through. Some of these people like Mish I respect a lot. I know for a fact that Mish is smarter than I am, way smarter and way more expert than I am in the world of finance.

So I'm just qualified enough to sound like I possibly know what I'm talking about but in fact, if it ain't simple, it generally looses me. So you be my judge. I see this deflationary cycle as being little more than liquidating excess inventory. Consumer demand has crashed so almost all businesses have to contract their profile or go into default. Most retailers are desperate to maintain cash flow, given tight credit conditions all the sudden so it's simple math to me. If you can't contract your business (contract in the sense of scaling down or making it smaller) and maintain liquidity through the transition, you are grass. But it's a short term thing. Yes, prices will continue to fall, housing has not come close to "hitting bottom" but ultimately nobody is making this stuff for free.

Excess inventory will eventually be liquidated, production will slow to meet (lack of) demand and prices will regain parity. The only permanent result I see is decreased demand. I don't think Americans will EVER consume at previous rates. Not in my lifetime at the least.

Meanwhile, every day since 1913, the Federal Reserve Note (FRN) has been slowly inflating, loosing value, being debased, call it what you will. It's not deflation that's heading us towards the rocks of debt default and utter monetary destruction. It's the rampant deflationary techniques of the Fed. It's not deflation that's causing the end of "full faith and credit" as foreign investors demand we write bonds in currencies OTHER THAN USD, it's inflation/devaluation. These terms are so intertwined as to become interchangeable.

True, Mish and many smart observers called the deflationary period shortly before it happened. And their wisdom helped a lot of prudent investors keep and make money. But what's helpful is more long-range predictions. Tracking devaluation helps us to see that our present course is heading us towards default on international debt and the subsequent reorganization of the currency. Deflation is not the cause, it's the temporary effect. I've made my thesis. Call me simplistic or make any critique you want, I'll read and consider all responses.

To move this into the utilitarian sphere, our advice about how to prepare for coming times has become almost pedantic in it's simple repetition: buy food, firearms, ammo, investment metals, surivial metals and start growing all the food you can on whatever space you have. As far as debts, our advice has not changed: if you are close to paying off your house or car and you have stable income, maybe go ahead and pay it off and own it. You have have minimal equity in an upside-down asset, it's time to dump it. And we're retreating from all USD denominated assets. I think the people buying T-notes are crazy, but I understand the motivation. Where do you put large amounts of fungible assets these days? At one point it would be handy to be liquid when the real bargain shopping starts, but which liquid? Frankly, beer isn't looking so bad these days. And I'm not talking about stocks in the holding companies obviously, I'd buy largfe amounts of booze at whoelesale. If I didn't have a tendency to drink the stuff, that is. Alas, this asset, liquid though it be, has limited fungibility for me as an investor. I can't trade empty bottles.

And even the greatest gold-bears among us cannot say if or how or when manipulation will end, which casts doubt to a certain degree about the investment aspects of metals. The survival aspects remain unimpeachable.

And those who have invested in ammunition over the past few years, these have seen a better return than any investment category I have seen, bar none. But these are solutions for those of means. I'm increasingly bothered by the issue of those without means and those who will soon find themselves without means. I've done a lot of consultation with different folks and we're about to unveil it on a conceptual level. Stay tuned.

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