QUESTION: “You have said in your blog that stocks and real estate (tangibles) are the place to be but you also mention deflation. … Can we really have inflating asset prices and deflation at the same time — or are you saying the deflation comes down the road,after 2015.75 (when we will pray for hyperinflation)?
ANSWER: We are experiencing DEFLATION as the cost of government rises and is squeezing out excess cash from the economy. The higher costs of taxes and regulation (such as Obamacare) will force prices higher. This is STAGFLATION where prices rise not from a DEMAND boom, but from a rising COST BOOM. This is similar to what took plave during the 1970s with OPEC.
The assumption of hyperinflation is that they will print money to meet obligations. Governments in deflation will attack the people and cannibalize the economy trying to meet the costs with taxes rising and courts ruling in favor of government. In part, government is also creating DEFLATION by keeping interest rates low their robbing from the elderly as they are unable to live off of their savings. The artificially low interest rates are also sending the pension funds into default (the next crisis) while they try to prevent their own expenditures rising. The inflation we will see with RISING interest rates. That is when you will see gold start to rise and sustain its gains
The major economies have NEVER gone into hyperinflation that is for new revolutionary governments or ones without sovereign debt. Mature governments instead attack their own economies and destroy them with taxes and the collapse in the rule of law in search of money to survive. Americans cannot have accounts outside the nation and government greed is creating a shrinking global economy that will manifest in higher unemployment, lower economic growth, and STAGFLATION (rising costs with declining economy growth).
When a currency collapses, it is replaced with a new one, then ALL tangible assets become the means to transfer wealth from one to the next. Germany backed its currency with real estate to stop the hyperinflation. Real estate loses its value if you go too far as will gold and you move into a Dark Age. Then it becomes food and that is the origin of money – back to square one. Hopefully, we can stop that before it is too late.
You will pray for hyperinflation because that way at least the government is not becoming aggressive hunting down money – they print it. Unfortunately, they are coming after everyone. They will be raising taxes dramatically once interest rates start to rise.
