How we pay for this mess

[Ache4Acres]

Currently we have seen only price deflation. Restaurants in Europe now charging 25% of prior tourist prices.

Here everything on sale.

The aging baby boomers has brought massive deflationary pressure around the world and it has be countered with massive money printing. The CV has kicked things out of kilter and nobody knows by how much. If govts get it wrong and over juice the system then say hello to massive inflation and they will be forced to massively raise interst rates like the 1980s

[macdon02]

Currently we have seen only price deflation. Restaurants in Europe now charging 25% of prior tourist prices.

Here everything on sale.

The aging baby boomers has brought massive deflationary pressure around the world and it has be countered with massive money printing. The CV has kicked things out of kilter and nobody knows by how much. If govts get it wrong and over juice the system then say hello to massive inflation and they will be forced to massively raise interst rates like the 1980s

I highly doubt that even if they manage to convince the banks to lend, will people borrow, the hoarding gives an insight to the thoughts of the masses, they are in save mode now. Volocity of money drops and until the local govt defaults, the hoarding of cash will continue.

[Ache4Acres]

Macdon. What does a “local government defaults” mean to the general populous?

Governments will pour as much money into the system as they think is needed. No govt can or will default in the western world. We all designed the systems around our printing press. If they need more money they just print it. Other countries especially in the EU gave up this option years ago. They are screwed.

We are just as screwed but won’t realize it because the inflationary loss of value in currency is harder to see until it is too late

[AC man]

I would start by tapping into our entitled leaders trust fund. Justine keeps telling us we are in this together!

[macdon02]

Macdon. What does a “local government defaults” mean to the general populous?

Governments will pour as much money into the system as they think is needed. No govt can or will default in the western world. We all designed the systems around our printing press. If they need more money they just print it. Other countries especially in the EU gave up this option years ago. They are screwed.

We are just as screwed but won’t realize it because the inflationary loss of value in currency is harder to see until it is too late

I agree they will continue to print unprecedented supply, what im saying is there will need to be a trigger event to unleash the capital, we can't see inflation until that happens. It's going to take longer then we expect. It will come, but im thinking 3 years realistically. I know we need something optimistic in this molested sector we are in. The default occurs when the majority realize they have been screwed in exchange for money and they gave up their life's savings for protection from something they can't see. This might take a conservative govt taking power so we give up hope of change through democracy.

There's 3 types of inflation, asset, demand and currency. We saw currency inflation in land prices as the loonie dropped. Demand, like the 70's, which i assume you are referencing? Asset price appreciation would be US equities rising as their dollar appreciated. If the loonie keeps dropping we will be saved some pain on grain prices but i don't see huge gains till there's a currency reset, widescale across the world. The availability of credit also factors in on inflation as well. It's not a simple one sided reaction tied to printing.

[AlbertaFarmer5]

I agree they will continue to print unprecedented supply, what im saying is there will need to be a trigger event to unleash the capital, we can't see inflation until that happens. It's going to take longer then we expect. It will come, but im thinking 3 years realistically. I know we need something optimistic in this molested sector we are in. The default occurs when the majority realize they have been screwed in exchange for money and they gave up their life's savings for protection from something they can't see. This might take a conservative govt taking power so we give up hope of change through democracy.

There's 3 types of inflation, asset, demand and currency. We saw currency inflation in land prices as the loonie dropped. Demand, like the 70's, which i assume you are referencing? Asset price appreciation would be US equities rising as their dollar appreciated. If the loonie keeps dropping we will be saved some pain on grain prices but i don't see huge gains till there's a currency reset, widescale across the world. The availability of credit also factors in on inflation as well. It's not a simple one sided reaction tied to printing.

Well said. But the current deflationary environment does give central banks the world over the license to print unabated without consequences for quite a while. At present, they can print almost unlimited, ad all it will accomplish is lowering the rate of deflation. Until like all things, the pendulum finally swings too far.

[helmsdale]

See the problem we're having, is that we're thinking rationally about this... I highly doubt that those in positions of power today are thinking this through to its logical endpoint. They are at best responding in real time to a developing situation without any real consideration for the consequences. The consequences are to be worried about tomorrow, next week, next year, or even next decade.

Increased taxes are one possibility as to how to pay for this, but they have to be palatable lest they be guillotined by the pitchfork mob. Some taxes are likely to be levied, but I'm thinking it'll be tinkering around the edges at best.

Im leaning towards cascading and uncontainable debt defaults myself. Personal and Corporate will get the snowball started, and even if they raise taxes, there'll be no effing money to be found. Eventually after every possible monetary and fiscal tool has been exhausted, global Sovereign defaults will roar to the forefront.

The other option, is we continue to muddle along kicking what's left of the can down the road some more.
Their ability to push normalization down the road has completely outstripped my ability to rationalize it anymore... We've had numerous opportunities to normalize. And at everyone of those opportunites, we've traded short term relief for long term pain. We've banked a shit ton of long term pain, and I don't think we can push it off any longer.

[helmsdale]

Well said. But the current deflationary environment does give central banks the world over the license to print unabated without consequences for quite a while. At present, they can print almost unlimited, ad all it will accomplish is lowering the rate of deflation. Until like all things, the pendulum finally swings too far.

There are a ton of people who are warming to the idea of UBI. At the moment, government injections of conjured fiat are not causing inflation, but as you say, the pendulum will eventually swing. It's going to be awful damned difficult for governments to convince the populace that pulling the intravenous needle is existentially necessary when the day comes.

[Austrian Economics]

I agree they will continue to print unprecedented supply, what im saying is there will need to be a trigger event to unleash the capital, we can't see inflation until that happens. It's going to take longer then we expect. It will come, but im thinking 3 years realistically. I know we need something optimistic in this molested sector we are in. The default occurs when the majority realize they have been screwed in exchange for money and they gave up their life's savings for protection from something they can't see. This might take a conservative govt taking power so we give up hope of change through democracy.

There's 3 types of inflation, asset, demand and currency. We saw currency inflation in land prices as the loonie dropped. Demand, like the 70's, which i assume you are referencing? Asset price appreciation would be US equities rising as their dollar appreciated. If the loonie keeps dropping we will be saved some pain on grain prices but i don't see huge gains till there's a currency reset, widescale across the world. The availability of credit also factors in on inflation as well. It's not a simple one sided reaction tied to printing.

Don't look to the 1970s as a guide to what will happen today. There are similarities, but the 1970s was a time of rising interest rates. Today they are falling. This creates a different, deflationary dynamic. With deflating commodity prices, producers have no pricing power. They must accept a lower and lower price until their debt becomes unserviceable and they go into default. This will take time to snowball. I think it's less than three years, but not immediate. Once the subsidies taper off in the next couple of months, we'll likely see some defaults about 90 days after that.

Most provincial and civic governments will be insolvent by the end of the summer. The IMF will be called into bail out the federal government within the year. But eventually they will run out of capital too.

[canolacrazy]

The bottom line is nobody really has a clue what is about to happen. governments have kicked the can for decades and never really paid a price. Consumers have also bought into the prevailing wisdom of borrowing as much as possible to buy a house, fancy cars and big screens because the cost of money is so low. The fact is they have been rewarded for these decisions for the last decade. I have been predicting a "reckoning" for almost as long as Errol, however I'm the one with egg on my face. Even with all the carnage in the world due to Covid, oil demand destruction etc. the stock market has rallied off the lows on the assumption that we've turned a corner, stimulus is working and sunnier days are ahead.
The question as farmers we have to ask ourselves is how will all this affect our commodities. I'm fairly bullish, but in these times I've been wrong so much it's hard to know how to take advantage, if it's possible.