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The Basement
hyper inflation in the USA?
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<blockquote data-quote="John Roberts" data-source="post: 23785" data-attributes="member: 126"><p>Re: hyper inflation in the USA?</p><p></p><p>I suspect many do. However locally individuals are more aware of the historically high near 9% unemployment that remains persistent beyond past economic cycles, and rising energy prices. </p><p></p><p>The dramatic expansion of the monetary supply is presumably to help reduce unemployment, but the uncertainty this creates in the mind of business somewhat mitigates any employment benefit. </p><p></p><p>I have followed this (currency value) for a long time. Back in 09 I invested in a Canadian and an Australian ETF as a dual play on relative currency and their commodity rich economies that should prosper as the developing world develops an appetite for same. Both are up 35+%.</p><p></p><p>Many economists are nervous about Bernanke's quantitative easing, and the potential for inflation. However there are still deflationary forces at play, globally and locally. The housing bubble created a huge amount of faux personal wealth that still hasn't worked out of the system. I estimate that housing may have another 10+% to fall. This is not an insignificant amount. There are other adjustments expected from china wrt their currency peg, and international economic evolution. </p><p></p><p>Most of the pricing distortions I have experienced locally are (IMO) more from bad government policy than simple inflation. For example I bought a can of corn from the food store last night for $0.65, only a couple years ago, that same can of corn was $0.33 . That price double is clearly caused by the artificial demand of using corn (food) to make ethanol. We could buy sugar based ethanol from Brazil, for cheaper than we can make it, but this is politics not good economic policy. This distorted price on corn impacts other food prices as corn gets displaced. </p><p></p><p>The energy policy is so screwed up, that we refuse to harvest oil here (we have a lot, plus gas and coal), while the problems associated with buying from nations who are not in our self interest "should be" apparent. To add insult to that injury, our energy policy diverts capital from ventures that would reduce our energy costs, to gee whiz projects like windmills and electric cars, that have been around for hundreds of years and not developed with private capital, because they don't make economic sense (beyond golf carts, etc). If they did private industry would have already developed them. This diversion of private capital (our tax dollars) toward uneconomic ventures, does not help jobs like they claim, but actually diverts resources away from real productive ventures that could both create jobs and more wealth (not destroy wealth, and pick short term winners that are unsustainable without more subsidies). </p><p></p><p>Bernanke is a student of the depression of the 1930s, and hyperinflation (like your Weimar Republic in the 1920s). He is walking the tightrope to prevent a deflationary cycle like japan experienced in the 1990s. That took them many years and some argue they never really recovered from it. That said there are concerns, that Bernanke is a little too beholding to his political handlers (there is an election next year, so unemployment better be much improved or else). There have been several attempts by congress to gain more control over Bernanke, and this won't diminish away (for better and/or worse). I for one, do not like his dual mandate of managing both inflation and employment, as I don't see how they can both be optimized at the same time. Or that monetary policy can even fix a structural employment problem like we are seeing. </p><p></p><p>FWIW from an "outside" perspective, the balance of trade that Germany enjoys looks out of whack too. Both germany and china enjoy net positive balances of trade. Such imbalances, like our negative balance, are unsustainable and eventually the currency will adjust to make imports more expensive and exports more attractive. This is not a new concept, Adam Smith discusses in the Wealth of nations, written hundreds of years ago. Germany is an interesting example, as they share a common currency with the EU, so the relative weakness of those other linked economies will somewhat compensate for Germany's trade imbalance, but there are huge shifts going on inside the EU. I suspect this is an uncomfortable reality between those nations, and one reason germany is so quick to give financial aid to their economic partners. Either they will make the association more complete to formally capture the weak states, or drop them out. </p><p></p><p>I hope my comments don't sound political, I am just calling it like I see it, and there is a strong policy involvement. </p><p></p><p>JR</p><p></p><p>PS: for more data points on relative currencies, I recall from buying stuff from Japan decades ago, a Yen dollar exchange rate up around 230Y or so to $1. Today it is around 82Y=$1. I also recall german DM being around 3.6 per $1 when I was there in 1970, but I since lost track of exchange rate since the euro conversion. The dollar has surely lost a lot of relative value also reflected in oil prices, but oil prices are more complex than simple exchange rates.</p></blockquote><p></p>
[QUOTE="John Roberts, post: 23785, member: 126"] Re: hyper inflation in the USA? I suspect many do. However locally individuals are more aware of the historically high near 9% unemployment that remains persistent beyond past economic cycles, and rising energy prices. The dramatic expansion of the monetary supply is presumably to help reduce unemployment, but the uncertainty this creates in the mind of business somewhat mitigates any employment benefit. I have followed this (currency value) for a long time. Back in 09 I invested in a Canadian and an Australian ETF as a dual play on relative currency and their commodity rich economies that should prosper as the developing world develops an appetite for same. Both are up 35+%. Many economists are nervous about Bernanke's quantitative easing, and the potential for inflation. However there are still deflationary forces at play, globally and locally. The housing bubble created a huge amount of faux personal wealth that still hasn't worked out of the system. I estimate that housing may have another 10+% to fall. This is not an insignificant amount. There are other adjustments expected from china wrt their currency peg, and international economic evolution. Most of the pricing distortions I have experienced locally are (IMO) more from bad government policy than simple inflation. For example I bought a can of corn from the food store last night for $0.65, only a couple years ago, that same can of corn was $0.33 . That price double is clearly caused by the artificial demand of using corn (food) to make ethanol. We could buy sugar based ethanol from Brazil, for cheaper than we can make it, but this is politics not good economic policy. This distorted price on corn impacts other food prices as corn gets displaced. The energy policy is so screwed up, that we refuse to harvest oil here (we have a lot, plus gas and coal), while the problems associated with buying from nations who are not in our self interest "should be" apparent. To add insult to that injury, our energy policy diverts capital from ventures that would reduce our energy costs, to gee whiz projects like windmills and electric cars, that have been around for hundreds of years and not developed with private capital, because they don't make economic sense (beyond golf carts, etc). If they did private industry would have already developed them. This diversion of private capital (our tax dollars) toward uneconomic ventures, does not help jobs like they claim, but actually diverts resources away from real productive ventures that could both create jobs and more wealth (not destroy wealth, and pick short term winners that are unsustainable without more subsidies). Bernanke is a student of the depression of the 1930s, and hyperinflation (like your Weimar Republic in the 1920s). He is walking the tightrope to prevent a deflationary cycle like japan experienced in the 1990s. That took them many years and some argue they never really recovered from it. That said there are concerns, that Bernanke is a little too beholding to his political handlers (there is an election next year, so unemployment better be much improved or else). There have been several attempts by congress to gain more control over Bernanke, and this won't diminish away (for better and/or worse). I for one, do not like his dual mandate of managing both inflation and employment, as I don't see how they can both be optimized at the same time. Or that monetary policy can even fix a structural employment problem like we are seeing. FWIW from an "outside" perspective, the balance of trade that Germany enjoys looks out of whack too. Both germany and china enjoy net positive balances of trade. Such imbalances, like our negative balance, are unsustainable and eventually the currency will adjust to make imports more expensive and exports more attractive. This is not a new concept, Adam Smith discusses in the Wealth of nations, written hundreds of years ago. Germany is an interesting example, as they share a common currency with the EU, so the relative weakness of those other linked economies will somewhat compensate for Germany's trade imbalance, but there are huge shifts going on inside the EU. I suspect this is an uncomfortable reality between those nations, and one reason germany is so quick to give financial aid to their economic partners. Either they will make the association more complete to formally capture the weak states, or drop them out. I hope my comments don't sound political, I am just calling it like I see it, and there is a strong policy involvement. JR PS: for more data points on relative currencies, I recall from buying stuff from Japan decades ago, a Yen dollar exchange rate up around 230Y or so to $1. Today it is around 82Y=$1. I also recall german DM being around 3.6 per $1 when I was there in 1970, but I since lost track of exchange rate since the euro conversion. The dollar has surely lost a lot of relative value also reflected in oil prices, but oil prices are more complex than simple exchange rates. [/QUOTE]
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