Thanks very much . Makes sense except one thing I'm not clear on. Did you mean to say pre 2008 derivative asset values would drop back to 0x or 1x over time. 0x would be zero which doesn't make any sense to me . I could see some assets at fractions of 1x perhaps .

halfastros81 said:

---

Thanks very much . Makes sense except one thing I'm not clear on. Did you mean to say pre 2008 derivative asset values would drop back to 0x or 1x over time. 0x would be zero which doesn't make any sense to me . I could see some assets at fractions of 1x perhaps .

---

Sure, 1x. Point was, you could see the derivative completely wiped out.

Interest rates increase if you shrink the money supply. Basic supply and demand says that if you decrease supply, then price goes up. Since the interest rate is the price of money, if you decrease supply, then rates will climb.

Deputy Travis Junior said:

---

Interest rates increase if you shrink the money supply. Basic supply and demand says that if you decrease supply, then price goes up. Since the interest rate is the price of money, if you decrease supply, then rates will climb.

---

Not to mention a country deflating largely because of its inability to pay off its debts is not going to attract investors wanting to buy its debt. They will be demanding a significant premium for any paper we put out in that scenario.

ABATTBQ11 said:

---

DallasAg 94 said:

---

I look at our Insurance renewal... we're sub 3 on Interest rate... there is no chance people are going to buy houses.

Our escrow is now 144% of our P&I.

Part of it is the value of the house has more than doubled since we bought it... so the Taxes have grown rapidly. And then, if you want to be Insured for the full value... well, you'll Insured for twice what you paid.

The Squeeze is on.

---

The house doesn't need to be insured to the property value, just the cost to rebuild. My in-laws place has absolutely skyrocketed in value strictly because of the land value, so the rate of insurance increase for them has not been nearly the same as the total property valuation.

---

I used to be able to insure for the amount I wanted. The past couple years insurance companies refused that approach and required that I insured at their estimate of replacement value which they link directly to market value. I even challenged one, and they sent an auditor who came back with an even higher value. Such a flawed process. It's a racket.

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

I would love me some deflation, but please provide details why deflation is a bad thing.

Quote:

---

I used to be able to insure for the amount I wanted. The past couple years insurance companies refused that approach and required that I insured at their estimate of replacement value which they link directly to market value. I even challenged one, and they sent an auditor who came back with an even higher value. Such a flawed process. It's a racket.

---

Do you have a mortgage?

Yes, 2.5%. But I only owe about 35% of the home value. I'm comfortable taking some replacement cost risk to keep my insurance premiums down but the insurance companies won't let me.

BTKAG97 said:

---

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

I would love me some deflation, but please provide details why deflation is a bad thing.

---

While it's a long-term good for the health of the country, the affordability for the low and middle class, and potential access to opportunity for prosperity for the younger generations, it's absolutely an awful thing for the short to mid term. Remember Brad Pitt from The Big Short?



Think about the overwhelming majority of people who actually contribute to the economy. Decades of retirement account gains gone. Jobs lost. Banks imploding (40% or so of banks didn't make it through the depression). People will lose their house. People who think they are millionaires might lose everything. It likely means we go to war. Every single person in the economy will feel it. This scenario wouldn't be 2008. It would be the 1970's on steroids with some 2008 mixed in multiple times throughout. Even people like me who are preparing would not come out the other side clean.

If we were to get a full deflationary spiral, it would change the world. It would be the period of time that is referenced for decades like the Great Depression was and still is. The people who survive will be like the greatest generation was after the depression, extremely frugal until their last breath. Gen z and gen alpha would likely be the ones fighting in wars. The ones who survive will shape generations to come from their sacrifices and experiences.

America might not even be the global leader anymore.

That's why the FED and government will throw everything they've got at it. They would rather hyperinflation and turning us into Venezuela. But there comes a point where a cycle ends. Whether forced or organically.

BTKAG97 said:

---

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

I would love me some deflation, but please provide details why deflation is a bad thing.

---

Bc it'll make 08 look like a Sunday picnic

Yea obviously most on this board will be ok... diverse portfolios & cash savings on hand... but we are a very small percentage of the American population


many are going to be out of work for a while, and as stated earlier in the thread, people over leveraged will lose a lot...

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

Not a good thing if you are a seller. People sitting on cash might like it (until their cash is spent).

Trump will fix it

Buck Turgidson said:

---

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

Not a good thing if you are a seller. People sitting on cash might like it (until their cash is spent).

---

Why I'm sitting on gold and silver. Hope for the best, be ready for the absolute worse.

AggieVictor10 said:

---

Trump will fix it

---

Of course


But the interim will be bad for many



Thanks establishment

1031 is your friend.

Get Off My Lawn said:

---

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

Deflation would require a removal of currency from circulation. That ain't happening. What MAY show up, though, is a recession which drives SOME prices down as common folks lose the disposable income to buy non-necessities.

---

Not necessarily. Constant money supply and increasing goods and services available for purchase also leads to deflation. 2025-2026 will be the years in which robotics really start kicking into high gear commercially. I predict increase in money supply but lower inflation than we've been seeing.

Mr. Fingerbottom said:

---

AggieVictor10 said:

---

Trump will fix it

---

Of course


But the interim will be bad for many



Thanks establishment

---

There was some pain for awhile when Reagan came in and began to clean up the mess. It wasn't only Carter's mess, however. Both LBJ and Nixon contributed heavily to creating the environments.

Buck Turgidson said:

---

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

Not a good thing if you are a seller. People sitting on cash might like it (until their cash is spent).

---

yep...if you are trying to sell your home or more important selling goods/services (in business), In a deflationary market...people will say "why buy this today when it will be less expensive tomorrow...and why buy it next month when it will be significantly less expensive in 3 months". Meanwhile, inventories skyrocket and businesses close due to lack of revenue/profit.
Also, salaries have not kept up AT ALL with inflation, but I can assure you, they will align quickly with deflation...so the avg worker will have less money to spend.

Psycho Bunny said:

---

Buck Turgidson said:

---

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

Not a good thing if you are a seller. People sitting on cash might like it (until their cash is spent).

---

Why I'm sitting on gold and silver. Hope for the best, be ready for the absolute worse.

---

Gold and silver are an inflation hedge, but will not help in a deflationary period.

Buck Turgidson said:

---

Psycho Bunny said:

---

Buck Turgidson said:

---

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

Not a good thing if you are a seller. People sitting on cash might like it (until their cash is spent).

---

Why I'm sitting on gold and silver. Hope for the best, be ready for the absolute worse.

---

Gold and silver are an inflation hedge, but will not help in a deflationary period.

---

Correct. That's because we value them in dollars. So while they are actually pretty stable in value, moving up and down based on supply and demand, in dollars, they would be falling during a deflationary period.

Quote:

---

Also, salaries have not kept up AT ALL with inflation, but I can assure you, they will align quickly with deflation...so the avg worker will have less money to spend.

---

Wages are pretty sticky, so as long as you have a job, I wouldn't expect to see salaries being cut. However, I would expect benefits and headcount to be reduced.

The one 'benefit' I see could increase is WFH, as companies lower overhead costs. Changes to WFH, and shifting of employment base to a lower-cost location (e.g. CA to TX), would be interesting to watch.

tysker said:

---

Quote:

---

Also, salaries have not kept up AT ALL with inflation, but I can assure you, they will align quickly with deflation...so the avg worker will have less money to spend.

---

Wages are pretty sticky, so as long as you have a job, I wouldn't expect to see salaries being cut. However, I would expect benefits and headcount to be reduced.

The one 'benefit' I see could increase is WFH, as companies lower overhead costs. Changes to WFH, and shifting of employment base to a lower-cost location (e.g. CA to TX), would be interesting to watch.

---

The problem with that is, we don't have data from the last time we actually went through real deflation. Remember, even in the 70's, we came off the gold standard and the money supply exploded. It just took a decade to take hold and for those loans into the economy to really get disbursed.

A truly deflationary period like we have been discussing will not see salaries and wages keep up. If the dollar is gaining value, EVERYTHING valued in dollars must fall in relation. Only way that changes is if the economy is so productive during that period that compensation is rising more than the rate of deflation. But if that's the case, i seriously doubt we will be experiencing the economic turmoil of deflation to begin with.

Again, everything you have been taught and ingrained with is within the confines of a 100 year inflationary bull market. A deflationary bear market economy would be reverse. Keynesians have controlled the economy for so long that everyone thinks Keynesian economics is "just how it is". It's been true for 100 years. But the scenario we have been discussing would see the Keynesian monetization of debt and deficits come to an end and Austrian economics become reality again.



This chart for salaries and wages literally mimicks M2.

Heineken-Ashi said:

---

Buck Turgidson said:

---

Psycho Bunny said:

---

Buck Turgidson said:

---

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

Not a good thing if you are a seller. People sitting on cash might like it (until their cash is spent).

---

Why I'm sitting on gold and silver. Hope for the best, be ready for the absolute worse.

---

Gold and silver are an inflation hedge, but will not help in a deflationary period.

---

Correct. That's because we value them in dollars. So while they are actually pretty stable in value, moving up and down based on supply and demand, in dollars, they would be falling during a deflationary period.

---

We value everything in USD, so we should be really trying to find assets whose value will be reduced less by deflation pressures. Historically, RE, gold, AAA bonds, I-Bonds, and bank/energy/consumer good stocks that paid dividends fit that bill. I think the concern is some of the more levered bank/energy/consumer good companies may be wiped out if deflation happens fast enough, and you don't know which ones they will be until it happens. (Think Enron, SVB, HTZ)

tysker said:

---

Heineken-Ashi said:

---

Buck Turgidson said:

---

Psycho Bunny said:

---

Buck Turgidson said:

---

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

Not a good thing if you are a seller. People sitting on cash might like it (until their cash is spent).

---

Why I'm sitting on gold and silver. Hope for the best, be ready for the absolute worse.

---

Gold and silver are an inflation hedge, but will not help in a deflationary period.

---

Correct. That's because we value them in dollars. So while they are actually pretty stable in value, moving up and down based on supply and demand, in dollars, they would be falling during a deflationary period.

---

We value everything in USD, so we should be really trying to find assets whose value will be reduced less by deflation pressures. Historically, RE, gold, AAA bonds, I-Bonds, and bank/energy/consumer good stocks that paid dividends fit that bill. I think the concern is some of the more levered bank/energy/consumer good companies may be wiped out if deflation happens fast enough, and you don't know which ones they will be until it happens. (Think Enron, SVB, HTZ)

---

I agree in theory. But go look at historical gold charts. Price moves higher in general as the money supply expands. It will be drop as the money supply shrinks. You might feel safer in gold than in stocks, but is losing 40% really much better than losing 60%? The safest place to be during true deflation is cold hard dollars.

Heineken-Ashi said:

---

tysker said:

---

Quote:

---

Also, salaries have not kept up AT ALL with inflation, but I can assure you, they will align quickly with deflation...so the avg worker will have less money to spend.

---

Wages are pretty sticky, so as long as you have a job, I wouldn't expect to see salaries being cut. However, I would expect benefits and headcount to be reduced.

The one 'benefit' I see could increase is WFH, as companies lower overhead costs. Changes to WFH, and shifting of employment base to a lower-cost location (e.g. CA to TX), would be interesting to watch.

---

The problem with that is, we don't have data from the last time we actually went through real deflation. Remember, even in the 70's, we came off the gold standard and the money supply exploded. It just took a decade to take hold and for those loans into the economy to really get disbursed.

A truly deflationary period like we have been discussing will not see salaries and wages keep up. If the dollar is gaining value, EVERYTHING valued in dollars must fall in relation. Only way that changes is if the economy is so productive during that period that compensation is rising more than the rate of deflation. But if that's the case, i seriously doubt we will be experiencing the economic turmoil of deflation to begin with.

Again, everything you have been taught and ingrained with is within the confines of a 100 year inflationary bull market. A deflationary bear market economy would be reverse. Keynesians have controlled the economy for so long that everyone thinks Keynesian economics is "just how it is". It's been true for 100 years. But the scenario we have been discussing would see the Keynesian monetization of debt and deficits come to an end and Austrian economics become reality again.



This chart for salaries and wages literally mimicks M2.

---

Deflationary pressures are also exerted with productivity declines.
I'm not saying we can outgrow or outproduce the next cycle. We probably need a reset to wash out the malinvestment. But nominal wages, again, are sticky. Benefits, compensation, employment, and real wages are not so much.

tysker said:

---

Heineken-Ashi said:

---

tysker said:

---

Quote:

---

Also, salaries have not kept up AT ALL with inflation, but I can assure you, they will align quickly with deflation...so the avg worker will have less money to spend.

---

Wages are pretty sticky, so as long as you have a job, I wouldn't expect to see salaries being cut. However, I would expect benefits and headcount to be reduced.

The one 'benefit' I see could increase is WFH, as companies lower overhead costs. Changes to WFH, and shifting of employment base to a lower-cost location (e.g. CA to TX), would be interesting to watch.

---

The problem with that is, we don't have data from the last time we actually went through real deflation. Remember, even in the 70's, we came off the gold standard and the money supply exploded. It just took a decade to take hold and for those loans into the economy to really get disbursed.

A truly deflationary period like we have been discussing will not see salaries and wages keep up. If the dollar is gaining value, EVERYTHING valued in dollars must fall in relation. Only way that changes is if the economy is so productive during that period that compensation is rising more than the rate of deflation. But if that's the case, i seriously doubt we will be experiencing the economic turmoil of deflation to begin with.

Again, everything you have been taught and ingrained with is within the confines of a 100 year inflationary bull market. A deflationary bear market economy would be reverse. Keynesians have controlled the economy for so long that everyone thinks Keynesian economics is "just how it is". It's been true for 100 years. But the scenario we have been discussing would see the Keynesian monetization of debt and deficits come to an end and Austrian economics become reality again.



This chart for salaries and wages literally mimicks M2.

---

Deflationary pressures are also exerted with productivity declines.
I'm not saying we can outgrow or outproduce the next cycle. We probably need a reset to wash out the malinvestment. But nominal wages, again, are sticky. Benefits, compensation, employment, and real wages are not so much.

---

The entire period you show there was within a larger inflation driven cycle. Again, we haven't had much more than periodic blips of deflationary pressure since the Great Depression. Nothing that compares to what a true deleveraging would look like.

Heineken-Ashi said:

---

tysker said:

---

Heineken-Ashi said:

---

Buck Turgidson said:

---

Psycho Bunny said:

---

Buck Turgidson said:

---

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

Not a good thing if you are a seller. People sitting on cash might like it (until their cash is spent).

---

Why I'm sitting on gold and silver. Hope for the best, be ready for the absolute worse.

---

Gold and silver are an inflation hedge, but will not help in a deflationary period.

---

Correct. That's because we value them in dollars. So while they are actually pretty stable in value, moving up and down based on supply and demand, in dollars, they would be falling during a deflationary period.

---

We value everything in USD, so we should be really trying to find assets whose value will be reduced less by deflation pressures. Historically, RE, gold, AAA bonds, I-Bonds, and bank/energy/consumer good stocks that paid dividends fit that bill. I think the concern is some of the more levered bank/energy/consumer good companies may be wiped out if deflation happens fast enough, and you don't know which ones they will be until it happens. (Think Enron, SVB, HTZ)

---

I agree in theory. But go look at historical gold charts. Price moves higher in general as the money supply expands. It will be drop as the money supply shrinks. You might feel safer in gold than in stocks, but is losing 40% really much better than losing 60%? The safest place to be during true deflation is cold hard dollars.

---

Gold is an interesting vehicle, especially now that it has become a financial asset. Futures, ETFs, and other products trade notional amounts in excess of the entire gold supply. Paper gold which is how we generally measure the price of gold, doesn't always reflect the physical gold price.

Peter Schiff, as is often the case, can explain it better than I ever could:
https://www.schiffgold.com/key-gold-news/paper-gold-scams-markets-and-reality

Quote:

---

During periods of market dislocation, paper gold prices can decouple from physical gold prices, leading to a situation where investors can be left holding paper contracts that don't guarantee delivery of real metal. This decoupling poses a risk for investors who might assume they are buying gold exposure but are instead acquiring a claim on gold that isn't matched by reality. Counterparty risk means that you're reliant on intermediaries like exchanges, banks, and custodians to ensure that the gold they are buying or selling is backed by physical metal. During times of market turmoil, there's always the possibility that these intermediaries might not be able to deliver on their promises.

---

Exactly why I will be exiting my metals trading positions as they approach the next top. Don't think we're there yet though. Silver is the last to explode and it will move fast. The gold to silver ratio will drop quickly signaling somewhere between weeks and months to the metals top. And when it tops, it reverses hard. Could be this year. Could be next. But it's definitely going to happen. I don't care about the price for my physical stuff. That's my hedge that will never be sold.

Heineken-Ashi said:

---

tysker said:

---

Heineken-Ashi said:

---

tysker said:

---

Quote:

---

Also, salaries have not kept up AT ALL with inflation, but I can assure you, they will align quickly with deflation...so the avg worker will have less money to spend.

---

Wages are pretty sticky, so as long as you have a job, I wouldn't expect to see salaries being cut. However, I would expect benefits and headcount to be reduced.

The one 'benefit' I see could increase is WFH, as companies lower overhead costs. Changes to WFH, and shifting of employment base to a lower-cost location (e.g. CA to TX), would be interesting to watch.

---

The problem with that is, we don't have data from the last time we actually went through real deflation. Remember, even in the 70's, we came off the gold standard and the money supply exploded. It just took a decade to take hold and for those loans into the economy to really get disbursed.

A truly deflationary period like we have been discussing will not see salaries and wages keep up. If the dollar is gaining value, EVERYTHING valued in dollars must fall in relation. Only way that changes is if the economy is so productive during that period that compensation is rising more than the rate of deflation. But if that's the case, i seriously doubt we will be experiencing the economic turmoil of deflation to begin with.

Again, everything you have been taught and ingrained with is within the confines of a 100 year inflationary bull market. A deflationary bear market economy would be reverse. Keynesians have controlled the economy for so long that everyone thinks Keynesian economics is "just how it is". It's been true for 100 years. But the scenario we have been discussing would see the Keynesian monetization of debt and deficits come to an end and Austrian economics become reality again.



This chart for salaries and wages literally mimicks M2.

---

Deflationary pressures are also exerted with productivity declines.
I'm not saying we can outgrow or outproduce the next cycle. We probably need a reset to wash out the malinvestment. But nominal wages, again, are sticky. Benefits, compensation, employment, and real wages are not so much.

---

The entire period you show there was within a larger inflation driven cycle. Again, we haven't had much more than periodic blips of deflationary pressure since the Great Depression. Nothing that compares to what a true deleveraging would look like.

---

same chart from FRED as far back as it goes

Agree we've seen nothing like the deflationary pressures that were in place during the GD. We almost had failures in 2008 but the Fed and Congress were able to bail out institutions long enough that we could grow out of it. Not sure the Fed and Congress will have the same ability next time.

Empty nester and sold the last house for over 2x what I paid 9 years earlier. Bought a smaller single story 40-year old home and completely remodeled it and invested the rest of what I made on the other house. Couldn't be happier with the smaller house, lower taxes and utility costs.

tysker said:

---

Heineken-Ashi said:

---

tysker said:

---

Heineken-Ashi said:

---

tysker said:

---

Quote:

---

Also, salaries have not kept up AT ALL with inflation, but I can assure you, they will align quickly with deflation...so the avg worker will have less money to spend.

---

Wages are pretty sticky, so as long as you have a job, I wouldn't expect to see salaries being cut. However, I would expect benefits and headcount to be reduced.

The one 'benefit' I see could increase is WFH, as companies lower overhead costs. Changes to WFH, and shifting of employment base to a lower-cost location (e.g. CA to TX), would be interesting to watch.

---

The problem with that is, we don't have data from the last time we actually went through real deflation. Remember, even in the 70's, we came off the gold standard and the money supply exploded. It just took a decade to take hold and for those loans into the economy to really get disbursed.

A truly deflationary period like we have been discussing will not see salaries and wages keep up. If the dollar is gaining value, EVERYTHING valued in dollars must fall in relation. Only way that changes is if the economy is so productive during that period that compensation is rising more than the rate of deflation. But if that's the case, i seriously doubt we will be experiencing the economic turmoil of deflation to begin with.

Again, everything you have been taught and ingrained with is within the confines of a 100 year inflationary bull market. A deflationary bear market economy would be reverse. Keynesians have controlled the economy for so long that everyone thinks Keynesian economics is "just how it is". It's been true for 100 years. But the scenario we have been discussing would see the Keynesian monetization of debt and deficits come to an end and Austrian economics become reality again.



This chart for salaries and wages literally mimicks M2.

---

Deflationary pressures are also exerted with productivity declines.
I'm not saying we can outgrow or outproduce the next cycle. We probably need a reset to wash out the malinvestment. But nominal wages, again, are sticky. Benefits, compensation, employment, and real wages are not so much.

---

The entire period you show there was within a larger inflation driven cycle. Again, we haven't had much more than periodic blips of deflationary pressure since the Great Depression. Nothing that compares to what a true deleveraging would look like.

---

same chart from FRED as far back as it goes

Agree we've seen nothing like the deflationary pressures that were in place during the GD. We almost had failures in 2008 but the Fed and Congress were able to bail out institutions long enough that we could grow out of it. Not sure the Fed and Congress will have the same ability next time.

---

Yup. But I wouldn't say we grew out of anything. Globalization and turning from a production economy to a consumer econonmy coupled with monetizing the debts (which is what leads to the widening gap between haves and have nots) is what supressed inflation until COVID. Don't forget, 2008 was saved because they took deposits, OUR deposits, from the banks, leveraged them, and then loaned them back out. Only those with the ability to take on the loans were able to monetize gains from them. The general middle class had their money stolen via future inflation and have no idea they are worse off today than they were in 2007. They will realize it when we are back to that point, their retirement account is down 60%, and they have nothing to show for 15 years. 2008 was not anyone saving the country. It leveraged the existing country and future generations wealth to pad the coffers, and all of that leverage will one day be sucked back out of the system.

I'm thankful I locked in my mortgage at 2.8% in 2021.

LMCane said:

---

Mr. Fingerbottom said:

---

All by design

Deflation coming soon

& no that's not a good thing

---

deflation is great news for savers and retirees on fixed income

---

That would be the boomers and some Gen X in the coming years

Unless wages start to keep up and inflation goes down, yes they will be unfortunately

nortex97 said:

---

Yukon Cornelius said:

---

The federal reserve isn't a government. It's our overlord.

---

Their state/local/property taxes were practically zero compared to ours, for the record.

---

The median US income tax payer does not pay 24%. Hell, they probably do not pay 5%