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Hyperinflationary or Deflationary Depression?

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  • Sun, May 10, 2009 - 12:49am

    #1
    chriscdwsg

    chriscdwsg

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    Hyperinflationary or Deflationary Depression?

Hi. I’ve been reading Mish, Denninger and Fekete who believe that we are heading for a Great Deflationary Depression, but others like Schiff, Jim Willie, John Wiliams of Shadow Stats, Ron Paul(?) and perhaps even Chris Martenson(?) think this is going to be a hyperinflationary depression. So all these leaves me quite confused. What are your thoughts?

  • Sun, May 10, 2009 - 01:02am

    #2
    Peak Prosperity Admin

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    Re: Hyperinflationary or Deflationary Depression?

I’m in the hyperinflationary depression camp.

  • Sun, May 10, 2009 - 01:14am

    #3
    Peak Prosperity Admin

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    Re: Hyperinflationary or Deflationary Depression?

I think the government has no choice but to print money to meet the pension obligations, deficit spending and every other debt obligation they need to meet to keep people from completely freaking out.  One day inflation will be unavoidable. Print, print, print. Any excuse to  spend and print more money. How else did we end up with a 3 trillion dollar deficit?  Just an opinion of course.  It seems to be headed towards biphasic in truth.(deflation first, then inflation).  We shall see.

humble regards  Denise

  • Sun, May 10, 2009 - 01:29am

    #4
    Peak Prosperity Admin

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    Re: Hyperinflationary or Deflationary Depression?

We are already "in" a deflationary depression.  Banks have run out of ideas on which to lend.  Maybe the next craze will be "commodity-backed securities".  Surely, the Fed is printing money, and this is showing up in rising interest rates and equities.  Not nearly enough to combat the amount of money that has disappeared in asset-backed securities.  It could turn hyperinflationary if obscene amounts of money are printed and credit becomes cheap again, sparking another speculative mania.

  • Sun, May 10, 2009 - 09:02am

    #5
    Peak Prosperity Admin

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    Re: Hyperinflationary or Deflationary Depression?

Unfortunately this is not as simply as we are already in a deflationary depression, or simply hyper inflationary. The facts are pretty straight forward if you ask me.

Right now we are experiencing deflation hence the reason the fed is expanding the money supply at such a rapid pace. (This money is not simply entering a black hole, and it is not all electronic and on credit cards as I have heard many times.)

I believe inflation is next and am in the schiff and others camp, but remember that this inflation, when it really kicks in (some numbers already show that it may have started kicking in already, I think there is a little time yet) the media will continue, but at a faster pace, spinning it as a recovery. Look at what they are already doing with the stock market, and we already know just from the reports from Dr. Martenson that the stock market is a horrible place to make economic judgments. Who is to say that the rise in the market isn’t already from inflation showing its ugly head, especially with the massive drops in the USDX we are now seeing.

In short, it won’t be one OR the other, I believe it will be one THEN the other, and possibly back for a third round (depending on how much more we through at it.)

Also, this question has been posed many times in other threads…..in fact, I really have to go to the original and respond there, I completely forgot about it, lol. 

I will post a link here for you, but if you want to search it the one I (and others in both views) have been debating and talking a lot about it there. It is called ‘Don’t bet on hyperinflation’

Also remember that hyperinflation is a currency event, not an economic event. With that said, keep in mind that during the GD1 we were the biggest creditor nation, and produced everything. We are now the biggest debtor nation, and produce nothing. What I am getting at here is the value of our dollar. What I am getting at is that I believe the value (USDX) of the dollar in itself has the potential to cause the lack of confidence that would be required in a hyper inflationary scenario.

  • Sun, May 10, 2009 - 11:43am

    #6
    Peak Prosperity Admin

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    Re: Hyperinflationary or Deflationary Depression and a 401k

Here’s a question:

What to do if you have a 401k/403b that you can not get the money out of without quitting your (so far) secure job? The $ is in a fidelity fund that is, right now, only in gov securities. So, this is a "safe" position for the moment. Of course, at some point these dollars will be worth much much less. the question becomes when to move it out and into some type of bond or equity fund. It appears the only equity funds to move it to would be ones that invest n Asian and Pacific rim countries and avoid the U.S. almost entirely.

What are others thoughts on signals to know when might be the time and if this is a good strategy?

Thank you.

  • Sun, May 10, 2009 - 09:30pm

    #7
    Peak Prosperity Admin

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    Re: Hyperinflationary or Deflationary Depression and a 401k

[quote=Septimus]

Here’s a question:

What to do if you have a 401k/403b that you can not get the money out of without quitting your (so far) secure job? The $ is in a fidelity fund that is, right now, only in gov securities. So, this is a "safe" position for the moment. Of course, at some point these dollars will be worth much much less. the question becomes when to move it out and into some type of bond or equity fund. It appears the only equity funds to move it to would be ones that invest n Asian and Pacific rim countries and avoid the U.S. almost entirely.

What are others thoughts on signals to know when might be the time and if this is a good strategy?

Thank you.

[/quote]

 

If you believe that we are going to have significant inflation as I do then then gold may be a good idea. Since you can’t buy gold directly from Fidelity you might consider the Fidelity fund FSAGX. It is a gold fund that has both gold mining stocks and bullion. I bought some not too long ago. Take a look and see what you think.

 

I know how you feel about the 401k/403b situation. I am in the same boat with my 403b. If you take it out you get screwed on taxes. If you leave it you lose when the stocks go down.

 

Ken

 

  • Mon, May 11, 2009 - 08:23pm

    #8
    Peak Prosperity Admin

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    Re: Hyperinflationary or Deflationary Depression and a 401k

Septimus,

I’m stuck in the same boat, I have a 401k that I don’t even have the option to cash out unless I lose or quit my job.  Or claim a hardship withdrawal, which I can’t because I don’t fit any of the ‘hardship’ qualifications… apparently there’s no "cash me out because I’ve lost faith in the chowderheads running the US financial system" hardship option .  I would begrudgingly but willingly take the tax hit if only they gave me the option to cash out.

Since my money is there to stay for the time being, I’m just going to try to move it around as I see fit among the limited options I have.  I’ve been out of stocks since the last small upswing to Dow 8700 many months ago and into my plan’s Stable Value Fund.  This is only a short term solution though… right now it seems like the best of a lot of crappy options, but like you I need to find another option in the long run.  Perhaps I’ll spread some of it back out into various stocks sometime after this bear rally ends and prices go crashing down again, but even though it’s not an extremely large amount of money I’m still hesitant to do that.  I also have international fund and emerging market fund options, but both my brain and my gut are telling me to stay away from those.  Some of the Asian and Pac Rim countries may not be ruining their currencies like the U.S. and others are, but that’s only one part of the problem and there are many other factors that could make those international funds tank and lose value just as easily.  Unless anyone else has special insights to this, I’m staying put in my stable value fund probably up until really ominous warning signs appear.  CM, Davos, and others have done great jobs keeping us in the loop of new developments, so I expect we’ll get some advance warning here.  I realize it may not make a difference where one puts it as after that point things may deteriorate to where it may become totally impossible to access/withdraw that money in ANY case (bank holiday or forced market closures or the like), but we gotta play with the hand we’re dealt.

– Nickbert

  • Mon, May 11, 2009 - 09:20pm

    #9
    Peak Prosperity Admin

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    Re: Hyperinflationary or Deflationary Depression and a 401k

Thank you Nick and Ken,

Good points. The Fidelity gold fund is one I will have to look at.  Nick – Good point about what could happen with the Pacific rim funds.

No good options for any of us really, I would be happy to take the tax hit if I could get the $ out of there!  🙂

– Septimus

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