The overriding principle is that if you perceive hyperinflation or even just substantial inflation is the next cycle and that cycle is immenient you borrow all you can and trade the money for hard assets. Clearly some hard assets are better than others -- precious metals probably being the best. Bankers have a great fear of inflation and the smaller the bank the greater the fear. A small savings and loan with almost every dime lent out at fixed rates against real eastate has little room to adjust. While a large money center bank with only a portion of their assts lent that way has the ability to short the dollar, T-Bonds etc. and adjust in ways to overcome or at least partially overcome the longer dated loans. Argentinian bankers had relatively small sums tied up in longer term maturities and had a great ability to adjust. Some of them -- Edmond Safra comes to mind -- did quite well during a period of substantial, but not hyper, inflation. Safra took in deposits in the local currency and used the deposits to stay short the that currency while long the dollar and some gold. He took a pounding on the interest rate differential but made that back and tons more on his short position.
Yea, but National Income gets cut in half. Wages are sticky. Prices aren't. Hyperinflation benefits debtors, sure. But it simulatenously depreciates wages, purchasing power, and therefore, national income. Imagine. The average middle class wage earner can afford 5 plasma tv's, every year. After hyperinflation, they can only afford 3, per year. Gross Domestic Product (Output), falls by 40%. Debts get repaid much easier.....if you've got a job. Hyperinflation (or, supply shocks), reduce national output = recession. So everything looks good on paper (stocks, real estate, hard assets all do great). But in real terms (output), the economy gets flushed. Incidentally, Germany, Argentina, Mexico - no nation has ever prospered from a rapid currency devaluation, to my knowledge.
hasn't this already been done? its just that most people do not want to accept that they have no present, let alone futures.... its safer in the cities than in the countryside and in the rurals, if you're watching the news, what with schools being taken over by distraught parents, more heinous crimes in the rurals than in the cities, peoples losing their minds.... wow, who would have ever thought we as Americans were so materialistic..... oh, but on economic reports, we often hear the words quoted: "consumer lead revival"... hmmmm, the two are linked....
Totally accurate. Individuals may be fortunate but societies get torn apart. No one in their right mind should cheer the current insanity.
I see your point and agree with much of it but you are failing to consider the possibility that you will not be able to sell your house because of highly inflated prices and because you will probably fall behind on your monthly payments because the cost of living has gone through the roof. If your house has gone up 3x then so has everything else with it, except your salary, which has probably gone up 2x. Inflation always kills the middle class even if it's mild inflation. It's more likley that your house will get repossed than it is that you sell it for its over-valued price.
Yes! Assuming he sells the house and takes the profit where is he going to live? In this situation he will be taking a step back in life. That's not necessarily a bad thing if he is retiring or is he wants a smaller house but if he's middle aged or has kids it's not an ideal situation.
for those who expecting hyperinflation- US risks following Japan's example of stagnancy http://news.yahoo.com/s/ap/20091112/ap_on_bi_ge/us_lost_decade
Oy, bob, you really are Russian. You still write in a Russian accent (your articles are all messed up. Not meant to be an insult, btw. Just saying I recognize a fellow refugee from the rodina and all. Bernanke is desperately trying to create inflation to inflate away government debt. As long as people don't buy the hopium and changium he's selling, the money printing will not result in more spending and investing - at least not here. Thus, I can't see how we're going to get any inflation, let alone hyper-inflation. Although, it seems likely that Bernanke's non-stop printing is already causing some inflation in Asia. As long as the U.S. population doesn't huff the Fed's stuff, we're much more likely to end up like Japan. Which, I guess is better for savers.