The Deflationary Risk of 2018

[errolanderson]

Here's a youtube clip explaining the huge differences between two key economic theories in the world fostered by Keynes (the money printer) and Hayev (the hangover response).

It pretty much explains the mess global economies are in right now (a 7 minute rap).


www.youtube.com/watch?v=d0nERTFo-Sk

[sumdumguy]

It doesn't matter, everything is relative. In 1971, I earned 1.75/hr wage, pumping gas, washing cars, fixing tires. A fancy new brick house in Sedley cost $16,000 in 1964. Everything is ten times more expensive today, except for GRAIN, but now farms are ten times bigger (so we can grow more for lless).

[Rareearth]

Can't stand rap




First, they sold their car.

Then, they downsized from a house to a small apartment.

Next, they cut meat from their diets. And now, they skip meals to ensure survival.

This is the story of Vanessa Posada and her husband Adolfo.

They live in Venezuela. And their money simply doesn’t go that far anymore.

Falling oil prices have sent the economy into free fall. Per experts, the inflation rate is 720% and rising.

And today, an estimated 93% of Venezuelans don’t have enough money to buy food.

It’s a sad story… especially considering that Vanessa did everything right.

She completed her university studies. Then she got a job as a schoolteacher. And she later got married and had a child.

But that’s not enough to save her from government money gone bad.

Consider that at the beginning of 2014, one Venezuelan bolivar equaled roughly 16 cents. Today, that bolivar will supposedly get you just 10 cents – a 38% decrease.

But that’s the official rate… the one no one pays attention to.

Today, one bolivar will actually get you just 0.000625 cents.

Put another way, at the beginning of 2014, you needed 6.25 bolivars to get $1. Today, using the black-market rate, you need 16,000 bolivars to get that same $1.

That means Vanessa’s bolivars are worth 99% less than just three years
—
This story shows how governments can inflate a currency away. And it can leave those using that currency in a dire situation.

There’s a way Vanessa could have protected herself from government-driven inflation.

I’ll show you that in a moment. But first, don’t think it can’t happen to you.

Government Money: It’s Not Really Your Money
Venezuela is an extreme case. Folks tend to dismiss it. They think it can’t happen in their country.

But there’s no shortage of extraordinary situations going on in developed economies, too.

Take Switzerland, for example.

So far in 2017, Swiss banks have paid $1 billion just for the privilege of holding their deposits with the country’s central bank.

It’s called negative interest rate policy (NIRP). It’s an unorthodox policy designed to stoke inflation.

Swiss banks are so worried about getting their cash back, they’re willing to take less of it in the future.

If you think that’s backward, you’re right.

Ten years ago, no one even thought this was possible.

What ever happened to earning interest?

And just last month, the European Union let slip that it would freeze bank accounts if there’s a bank run
—
A person familiar with the German government’s thinking recently told Reuters, “The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge.”

The European Union wants to help failing lenders. It wants to keep banks solvent.

The only problem: It wants to use your money to do it.

The worst part is that it would be an ex parte procedure. That means without YOUR knowledge.

Per the European Commission, this would have a “surprise effect” and reduce the chance of you moving your money elsewhere.

Should this happen, we’d once again see the value of currencies inflated away.

So if you can’t trust government money, what can you trust?

[sumdumguy]

And how could Vanessa have protected herself!

[Rareearth]

Crypto currencies, bit coin etc

I'm having trouble with that. Somehow I feel that those internet cords can be cut by govt as well.

[biglentil]

Tangibles including food, lead, brass, gunpowder, Rottweiler.

[tweety]

Errol's Excellent Video

https://www.youtube.com/watch?v=d0nERTFo-Sk

[15444]

Tangibles including food, lead, brass, gunpowder, Rottweiler.

Bingo. Crypto currency could be easily outlawed and those using it be prosecuted as an act of tax fraud.

[biglentil]

Errol's Excellent Video

www.youtube.com/watch?v=d0nERTFo-Sk

Enjoyed that well done!

[errolanderson]

It's just a matter of time when defaults are next in U.S. Bonds . . . .

[farmaholic]

....and I would bet the average person hasn't done or can't do anything to prepare for this financial Armageddon.

Rich people can shuffle their capital around to what they consider safe holdings. Hard assets...Sask farmland. It "has been" a boom for some that came to the party early...even if it corrects they will have done fine. But those who came late may think otherwise....the entertainment has already left and the early arrivals are drunk with satisfaction of making a wise choice. (Just babbling).

The thing is, the house of cards may fall or the can can no longer be kicked down the road because of a dead end....but seems it collapses and the pieces get picked up and away we go again.....repeat.

Just hope you have enough time for the portfolio to recover.....has anyone prepared themselves....or is it one day at a time business as usual, like it is here. Belt tightening? Mine is always cinched fairly tight. I don't like dropping my pants for anyone or having them drop too low having my ass exposed to the world.

[errolanderson]

Whoa, a shocker story . . . Amazon cuts prices at Whole Foods more than 40% on 1st day. This will send chills down the grocery sector . . . .

https://www.bloomberg.com/news/articles/2017-08-28/amazon-cuts-prices-at-whole-foods-as-much-as-50-on-first-day