| Author |
 Topic  |
|
|
Country
1000+ Penny Miser Member
USA
3121 Posts |
 Posted - 08/16/2009 : 10:59:25
|
The debt bubble has already burst, and the attempts by the Fed to reflate it have created an enormous burden on the U.S. taxpayer. Since I first detailed the bailouts last October, obligations have ballooned from approximately US$2 trillion to an incredible $23.7 trillion according to Neil Barofsky, the special inspector general of the Troubled Asset Relief Program (TARP).
Don't expect any government agency to protect you from the coming hyperinflationary depression in the U.S. Now is the time to reduce your debt, sell off unwanted assets, and live below your means.
You must be logged in to see this link.
|
---> Come to the new and improved realcent: http://realcent.org
The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life.
– Theodore Roosevelt
|
|
|
theo
Penny Hoarding Member
USA
588 Posts |
Posted - 08/17/2009 : 17:27:45
|
I've never understood why we're constantly told to reduce our debt when hyperinflation threatens. Every econ text tells you that inflation always favors borrowers. Assuming payments can be made and there is no threat of default, I wouldn't recommend paying down a dime of "manageable debt".
|
 |
|
|
Ardent Listener
Administrator
USA
4841 Posts |
Posted - 08/17/2009 : 19:58:19
|
quote:
Originally posted by theo
I've never understood why we're constantly told to reduce our debt when hyperinflation threatens. Every econ text tells you that inflation always favors borrowers. Assuming payments can be made and there is no threat of default, I wouldn't recommend paying down a dime of "manageable debt".
That may be true of fixed rate debt but what about variable interest rate debt? A variable interest rate can not only keep up with inflation but also stay ahead of it.
Consider too that if a hyperinflation were to occure and even if you have a fixed rate debt on some seneless items, it will still drain precious dollars from your budget that will be needed just to put food on your table. |
Realcent.forumco.com disclosure. Please read.
All posts either by the members, moderators, and the administration of http://realcent.forumco.com are for your edification and amusement only. It is not the intent of realcent.forumco.com or its host to provide investment, medical, matrimonial, legal, security or tax advice and nothing posted here should be considered to be so. All rights reserved.
Think positive. |
|
|
|
fb101
Administrator
USA
2856 Posts |
Posted - 08/17/2009 : 20:59:57
|
quote:
Originally posted by theo
I've never understood why we're constantly told to reduce our debt when hyperinflation threatens. Every econ text tells you that inflation always favors borrowers. Assuming payments can be made and there is no threat of default, I wouldn't recommend paying down a dime of "manageable debt".
And another thing is, when gas hits $4.00 and your food bill triples, and cap and tax causes your other energy costs to double (which will inflate everything else), all debt becomes hard to keep up with, and the likelyhood of someone defaulting goes way up. When times get tough, people will buy food first and worry about the mortgage later.
The only way you make out with the debt is if you have taken on that debt and purchased something that will produce returns that increase with inflation, such as PMs.
For example I wish I had taken every penny of credit I could get and poured it into gold at $300 a few years ago. The same debt in anything else (except silver) would be choking me right now. |
 |
Edited by - fb101 on 08/17/2009 21:03:14 |
|
|
|
Bluegill
1000+ Penny Miser Member
USA
1964 Posts |
Posted - 08/18/2009 : 17:20:26
|
quote:
Originally posted by theo
I've never understood why we're constantly told to reduce our debt when hyperinflation threatens. Every econ text tells you that inflation always favors borrowers. Assuming payments can be made and there is no threat of default, I wouldn't recommend paying down a dime of "manageable debt".
Correct me if I'm wrong, but wouldn't ones wages have to rise and keep up with the inflation rate for that to work effectively?
|
|
|
|
theo
Penny Hoarding Member
USA
588 Posts |
Posted - 08/18/2009 : 21:10:37
|
quote:
Originally posted by Bluegill
quote:
Originally posted by theo
I've never understood why we're constantly told to reduce our debt when hyperinflation threatens. Every econ text tells you that inflation always favors borrowers. Assuming payments can be made and there is no threat of default, I wouldn't recommend paying down a dime of "manageable debt".
Correct me if I'm wrong, but wouldn't ones wages have to rise and keep up with the inflation rate for that to work effectively?
Yes, and that's probably what we'd see. But it would still be difficult on the common worker as the increase in wages would probably trail increases in other prices. Remember that the price of labor is subject to market forces just like any other resource. In the accounts of Wiemar Germany I've read, workers were constantly getting raises although they didn't always keep up with the prices for commodities and food. In the early 80s, it was common for workers (especially those in unions) to get cost of living adjustments (COLAs). So I think we'll see similar responses to our next bout with inflation. The loan (pun intended) bright spot in this scenario would be that fixed loan payments would become an increasingly small part of ones monthly expenditures.
Obviously, taking on variable credit card debt is a losing proposition. I'm a big believer in paying off your credit cards every month. However, instead of paying down my fixed debt, which I know won't increase; I want to use that money to buy hard and usable assets, which I know will increase in price.
|
|
|
|
redneck
1000+ Penny Miser Member
1273 Posts |
Posted - 08/18/2009 : 21:15:32
|
quote:
In the early 80s, it was common for workers (especially those in unions) to get cost of living adjustments (COLAs)
The House and Senate still get them every year...
> |
|
|
|
Bluegill
1000+ Penny Miser Member
USA
1964 Posts |
Posted - 08/19/2009 : 15:36:21
|
quote:
Originally posted by theo
quote:
Originally posted by Bluegill
quote:
Originally posted by theo
I've never understood why we're constantly told to reduce our debt when hyperinflation threatens. Every econ text tells you that inflation always favors borrowers. Assuming payments can be made and there is no threat of default, I wouldn't recommend paying down a dime of "manageable debt".
Correct me if I'm wrong, but wouldn't ones wages have to rise and keep up with the inflation rate for that to work effectively?
Yes, and that's probably what we'd see. But it would still be difficult on the common worker as the increase in wages would probably trail increases in other prices. Remember that the price of labor is subject to market forces just like any other resource. In the accounts of Wiemar Germany I've read, workers were constantly getting raises although they didn't always keep up with the prices for commodities and food. In the early 80s, it was common for workers (especially those in unions) to get cost of living adjustments (COLAs). So I think we'll see similar responses to our next bout with inflation. The loan (pun intended) bright spot in this scenario would be that fixed loan payments would become an increasingly small part of ones monthly expenditures.
Obviously, taking on variable credit card debt is a losing proposition. I'm a big believer in paying off your credit cards every month. However, instead of paying down my fixed debt, which I know won't increase; I want to use that money to buy hard and usable assets, which I know will increase in price.
Absolutely, and that, I fear is going to prevent a lot of people from ever getting a pay increase. Some sectors will still have more positions than qualified people and do alright. But most will be the other way around, bottom line, there are just more workers than positions. As you mentioned the unions will probably do alright too. Especially now that they have their man in the White House who has been bought and paid for...
For those who's wages will not keep up with inflation, fb101's scenario seems most likely. Even at 0% interest. What income one does have just wont be enough money to go around...
We are heading for some financial hard times... 
|
|
|
|
keys
Penny Collector Member
383 Posts |
Posted - 08/22/2009 : 14:36:46
|
Another detail to consider-
What is the real world inflation rate vs the government's official inflation rate.
During a hyperinflationary time, the government will come out and declare the inflation rate is 'officially' 50% while the costs of goods and services in the real world is 75%.
Employers will state that since the inflation rate is officially 50%, pay raises will only go up 50%, maybe 55% but no more. Workers and unions will balk but eventually settle for what is offered or face the risk of the employer going out of business or going overseas.
Worker/job ratio- There are undocumented immigrants who will do work for much less than documented workers.
If workers demand too much pay during hyperinflationary times, workers may find themselves out of a job.
|
I change with the times-
but like silver coins found in your change
I stay the same.
*****************
The United States of America started out as the new Republic of Rome.
Will The United States of America end up as the New Imperial Rome? |
|
|
| |
Topic |
|
U.S. Credit Card Trap
Forum Locked
