Fiscal Cliff Showdown

[liberty]

All currencies could go down...relative to gold. Some won't likely, such as the Swiss Franc, but most will. But even the Swiss have become alarmed at the appreciation of their currency lately.

What's notable about the financial market action today is that gold is up again. The MSM are telling us that financial markets are worried about Greece, but that's nothing new. Previously, when some country in Europe barfed, gold and commodities would crater along with the broad market, and U.S. treasuries would soar. Now gold is bucking that trend because the new Obama administration is firmly committed to inflation and debt. Prior to the election, investors felt that there was a chance to elect someone who would defend the U.S. currency. That's water under the bridge now.

[ado089]

I'm not sure why we as farmers should be
concerned about inflation. A little
inflation would make my outrageous
mortgage look a little better even if it
does mean 18% interest rates. I have a
bigger fear of $12/bu canola becoming
$3/bu canola and my mortgage on $1250/ac
land becoming upsidedown. If 0 interest
rates and 3 rounds of QE hasn't caused
inflation, nothing will. The cliff we
are headed off is deflation and wealth
destruction. Picture japan circa 1990
except happening to 3/4 of the worlds
economy all at once.

[liberty]

"I'm not sure why we as farmers should be concerned about inflation."

Be careful what you wish for. Remember the late 70's and early 80's? There is no getting around the fact that every inflation tap eventually has to be turned off. When this happens, commodity prices will plunge. An interest rate of 18% seems OK when commodity prices are rising, but when they fall, 18% interest becomes a crushing burden. I can clearly recall what that did to a number of farmers in my area at that time. I don't want to re-live those days, but it's going to happen anyway.

[hedgehog]

commodity prices crashed in the early eighties because of oversupply, not inflation.
food is short in the world and looks like staying that way.
if borrowing is tightened, even less will be grown.

[bucket]

It all comes down to the fact that people have to eat. I think we are in the best business. I can go without new iron but not many can go without food.

And hedgehog is right, less will be grown without the proper amount of money supply buy fuel, seed and fertilizer to grow it.

I am not sure even the experts have figured out a record crop in south america won't refill the world's bins.

[ado089]

the biggest farms in the area got that
during the eighties. I would rather make
ridiculous land payments with most of it
being interest as opposed to ridiculous
payments being all principal.