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alstry (35.44)

How Cheap will thing get?????

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December 31, 2008 – Comments (19)

An interesting question indeed......

Will the DOW drop below 2000????  Like it was less than 20 years ago.......

Oil drop below $20 per barrel????

Will Office Rents drop over 50%???

Will Home prices drop 60%????

Will US wages fall even further?????

All interesting questions as many of the above are well on the way to becoming a reality............

Can you imagine the deals if you just had a few US dollars???????

But then again, some people think we have inflation......

19 Comments – Post Your Own

#1) On December 31, 2008 at 11:27 AM, Mary953 (71.86) wrote:

I wonder how it would feel to be on a fixed income with prices going down instead of up.  Would cost-of-living increases become cost-of-living decreases?  How about savings - suddenly worth more because you could buy more with your money?

On the other hand, would the cries of "tax the wealthy" turn into "tax the old" and would younger generations turn to older because 'you worked when jobs paid real money'?

If I sound a bit wistful, it is because I, like many, suffered from parenting disease for so many years.  That is the condition wherein you check your kids' shoes for signs of wear or size before you decide whether you can afford a new pair for yourself.  You do that for everything.  Having graduated from that condition, I do not plan on going back.  It would be sheer delight to think that the luxuries in life would fall in price even faster than the spending power of our currency.

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#2) On December 31, 2008 at 11:28 AM, RandolphFL (< 20) wrote:

It's a funny idea that things get cheap during deflation.

Everything deflates in price, at varying rates of course.  The main thing people forget that drops in price.... the cost of a person working for you.  When that drops of course, things are not really getting cheaper, now are they?

It is already happening.  Fed Ex made pay cuts to thousands of employees ranging from 5% up to 20% this month.  Doesn't sound like low fuel costs are really helping those guys... and they are really sensitive to fuel costs.  People should consider Fed Ex, if they are encouraged by the freefall in prices.  Things aren't getting cheaper, it is a monetary problem.

Allstry is top dead center, with the comment about...'if you just had a few dollars'.

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#3) On December 31, 2008 at 11:40 AM, alstry (35.44) wrote:

Randolph......

As I indicated before...hyperinflation kills everyone.....deflation, although hurts many, rewards the savers.

Now the question is which direction we go........

Guess which way I am thinking??????

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#4) On December 31, 2008 at 11:52 AM, tfirst (31.59) wrote:

The government isn't going to let deflation happen. If deflation does happen, it is a sure sign the government can no longer influence the market. Then, we all have trouble.....

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#5) On December 31, 2008 at 12:03 PM, alstry (35.44) wrote:

Tfirst,

We are already in the grip of deflation......the government can't force people to spend when the don't have any money.

As far as all of having trouble.......do you think we will have more trouble with deflation or hyperinflation????

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#6) On December 31, 2008 at 12:25 PM, semper77 (32.87) wrote:

We'll see deflation in 2009, then inflation in 2010 and therafter....

What most people are missing however is that you just don't go from one extreme to the other overnight and with Volcker in the fold, I don't see the gov't overshooting to the degree most of the doomsayers are saying.

I know how easy it is to be negative here (and make no mistake about it, I'm still bearish for 2009), but I would temper this with some common sense.

When its all said and done, this will go down as our worst recession since the Depression, but it will not repeat the Great Depression nor will it be worse than it.

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#7) On December 31, 2008 at 12:28 PM, kaskoosek (85.49) wrote:

This blog is borderline lunacy.

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#8) On December 31, 2008 at 12:31 PM, alstry (35.44) wrote:

Semp,

I think you are walking on the right path.

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#9) On December 31, 2008 at 1:14 PM, kaskoosek (85.49) wrote:

Public Spending + Goverment Bailouts + US Tbills owned by foreign governments + Weak Export Base = depreciation of the US dollar.

 

Depreciation of the dollar if significant will lead to very high inflation. This does not have to be the case if the US goverments stops bailing and printing. If it stops, savings would increase prompting a recession that would help the trade balance.

The goverment has a Kensian mindset therefore the latter will not happen, the government wants to create inflation so that the real value of debt is erased (both private and public).

 

 

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#10) On December 31, 2008 at 1:29 PM, kaskoosek (85.49) wrote:

0.8 US $ in 2001 = 1 euro

1.4 US $ in 2009 = 1 euro

 

Purchasing power of the US dollar has decreased if you encompass a larger time span.

 

 

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#11) On December 31, 2008 at 1:41 PM, Harold71 (22.97) wrote:

Anyone expecting a long-term "strong dollar" is willfully ignorant of the facts.

How strong will the dollar be when the US Gov't needs to pay the $53 trillion in unfunded pension liabilities?

How strong will the dollar be when foreigners realize that the US Treasury market is the largest Ponzi scheme of all time?

How strong will the dollar be when foreigners realize that our economy is a shell of its former self, we morphed into a service/financial economy, and we lack the manufacturing capacity to repay them with real goods?

How strong will the dollar be when the US Gov't needs to declare bankruptcy, after her economy collapses due to massive "deflation," while the debt owed grows dramatically?

Come over to the dark side...join us Alstry...join us.

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#12) On December 31, 2008 at 1:54 PM, BradAllenton (31.46) wrote:

Deflation never lasts over long periods because the cure for it is printing money. Deflation is always just a "pull back" in inflation. The long term trend always kicks back in.

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#13) On December 31, 2008 at 3:50 PM, alstry (35.44) wrote:

kas,

let's add in one more  date just to really give us enough time....

1980......Gold   US $800

2001......Gold  US $300

2008......Gold  US  $800

Although the figures have been rounded for illustrative purpose....you may want to redefine your definition of "willfully ignorant"......

You  may want to look at the ratio of the dollar to the british pound in the 70s for confirmation.(the euro was not in existence back then)

By the way, thanks for your comment.

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#14) On December 31, 2008 at 4:27 PM, semper77 (32.87) wrote:

I talk to several financial professionals in Europe who are not as convinced of the dollar's collapse as many are here in the U.S.

They site their own bailouts and economic hardships which take on a tone not unlike that which I read here on these blogs.

While I do believe that the current dollar strength will reverse and correct, I don't foresee the utter collapse that most do. Keep in mind that everything in the world economy is relative to each other and that other economies have issues that will effect their currencies too.

Its too simplistic to say that since the U.S. government is printing more money that the value of the dollar will collapse against all others.

Surely, it is a negative influence, but as alstry's gold prices above will attest, its only one factor in a myriad of factors that determine the strength of the dollar.

 

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#15) On December 31, 2008 at 4:30 PM, Harold71 (22.97) wrote:

Hey man, I was one saying "willfully ignorant of the facts," not kaskoosek.

And I stand by it. 

The facts are that this US economy has practically never been in worse shape, even before the Great Depression.  The public and private debt to income ratio is WORSE, and the future liabilities of the US gov't have never been higher, now combine that with an economy that is rapidly shrinking -- well, the US economy/dollar couldn't make it out of these obligations with strong growth, much less negative.

BTW, let's add another date in your debate with kas!

1971......Gold  US $40.81

Yes buying all of your gold at the peak in 1980 would have sucked.  That would also be foolish...

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#16) On December 31, 2008 at 5:00 PM, alstry (35.44) wrote:

Harold, you are right...sorry Kas.

let's even add another date.....

Gold 1793......$19.39

If you took $19.39 in 1793 and put it in the bank in a 240 year CD......you would have over $20 million today in dollars.  If you took that same ounce of silver and put it in a safe deposit box, you would have about $900 dollars less any safety deposit fees.

Any more dates you would like to choose???????

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#17) On December 31, 2008 at 5:04 PM, alstry (35.44) wrote:

whoops...same ounce of gold....not silver.

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#18) On December 31, 2008 at 8:00 PM, Harold71 (22.97) wrote:

Any more dates you would like to choose???????

Well, I like to pick dates that are actually relevant

1971 was very relevant.

There was virtually no inflation during the 1800's and through 1913, minus problems in the Civil War.  The dollar was as good as gold.  And that was a good thing. 

Good luck getting good interest on that CD these days.  I used to have CD's but now they're not attractive IMHO.  If they were 7% you'd have an actual case on your hands. 

Oh and sorry, your 240 year CD was lost during the Bank Holiday in 1933.  We gold bugs were allowed to keep our measly 5 ounces each, and we hid the rest.  :)

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#19) On December 31, 2008 at 10:17 PM, starbucks4ever (98.28) wrote:

"Everything deflates in price, at varying rates of course.  The main thing people forget that drops in price.... the cost of a person working for you.  When that drops of course, things are not reallygetting cheaper, now are they?"

A false argument. When there was inflation, nominal incomes never caught up. COLA adjustment was a sham, most of the time it was some version of "let them substitute beef with hamburger". If we never got a payraise on the upside, why would we have to take a cut on the downside? 

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