Hrm.  This guy's logic seems alright to me.  A friend recently said it is the time to go buy a really, really expensive house, since once inflation goes way up, the house loan will be the same as a loaf of bread at the new rates...  :)

Posted by Jon Daley on August 28, 2011, 10:17 pm | Read 5335 times
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As a general overview the video isn't bad.
In many ways he explains the situation well - and in many ways the situation is similar to the stagflation of the late seventies. My feelings of there being no way out then are similar to the ones I have now. The difference is I don't have the years left to catch up with any new reality that emerges as I had then.
To sum up what got us out of stagflation in the 80s without the anticipated collapse as described in the video: 1. Ronald Reagan's unbelievable jaw-boning, cheer leading and egging everyone on that we were not a country of has-beens. 2. The emergence of the micro-computer industry and the devices and software that were created out of this whole new industry that allowed growth to overcome the truly troublesome debt issues.
Can we do it again? What will come along to be the new industry no one has thought of yet? Without some kind of growth/miracle like that, we are in trouble. I have confidence that the young folks will come up with something.
As to going in to debt in anticipation of rampant inflation - and individual is a bit different from a country. Brazil could scrap the Cruzero and replace it with the Real -- but an individual owes the debt to an entity that wants to collect on it. IF one is confident one will have the cash flow to service the debt, then the strategy has some merit. However, you only need a temporary cash flow interruption long enough to cause you to default and be foreclosed on to make the strategy a problem. The question of timing is important too. Right now housing is still dropping, even though other costs are rising. If one were to take a big debt now, could one fund it until the rampant inflation fires stoke housing prices?
Interesting post.

Posted by Dad-o on August 29, 2011, 7:20 am

The end makes me think the video has a second part to it. Or does he really think it's helpful to first tell me we're looking at a hitherto unknown global economic disaster and then tell me to "go prepare?"

My hunch is, though, that nobody will let the US default that easily. Everyone who's lent the US money knows that if the US defaults, it's hard knocks for their economy, too. If Europe's trying to save lowly Greece, I'd be very surprised if the global creditors didn't pull out all the stops to save the US.

Posted by Stephan on August 29, 2011, 4:37 pm

But, the quantities are different for saving the US vs. Greece, right?

Posted by Jon Daley on August 29, 2011, 6:14 pm

Yes, as is the motivation, I'd assume.

Posted by Stephan on August 30, 2011, 4:52 pm
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