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Inflation or deflation?

Submitted by punjabimunda on Fri, 03/20/2009 - 19:51
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Should I hold onto my cash?

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We are deflated

Submitted by cammy on Sat, 03/21/2009 - 12:59.

CPI is at .4, whereas the optimal inflation rate is 3%. This has partly to do with the credit freeze, there is not enough money in circulation. People arent buying or selling enough.

The goal of the Federal Reserve is to lower the interest rate and reserve requirements, resulting in higher investment and more loanable funds. By injecting money into the market, they are creating inflation in order to bring it up to 3%.

There is no "optimal inflation rate."

Submitted by jcr@mac.com on Sat, 03/21/2009 - 14:00.

Capital investment, inventions, and process improvements naturally reduce the cost of most goods and services over time. When Bernanke touts steady prices, he's whitewashing the fact that the banksters have been skimming those savings since the Fed was created.

-jcr

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"The problem with trying to child-proof the world, is that it makes people neglect the far more important task of world-proofing the child." -- Hugh Daniel

If people aren't borrowing now, why would increasing the inter-

Submitted by Qwerk on Sat, 03/21/2009 - 13:24.

est rate help the situation? Please explain further. Thanks.

They arent increasing the

Submitted by cammy on Sat, 03/21/2009 - 13:57.

They arent increasing the interest rates. They are lowing them, actually. The main one is set between 0 and .25. Lower interest rates means more investment.

However, more investment is not really happening, correct?

Submitted by Qwerk on Sat, 03/21/2009 - 18:49.

I think the Fed is reacting to situations and not helping us at all. Since we were able to live without this "central bank" before 1913, I think we can do it again.

There were many more panics

Submitted by cammy on Sat, 03/21/2009 - 23:07.

There were many more panics and depressions and bank failures in the 1800s than we have had since 1913

Bump for more insight. So as

Submitted by punjabimunda on Sat, 03/21/2009 - 12:56.

Bump for more insight.

So as I understand, we're heading into a deflationary depression and not a inflationary one (at least for a few years).

The IMF (International Monetary Fund)

Submitted by Bonhomme Richard on Sat, 03/21/2009 - 19:04.

Just reported that advanced nations are in for a deep recession. I interpret that as a long deflationary period.

The wild card is if Foreign Treasury bond holders start selling, interest rates on the long end will go up, i.e. 10-20-30 year bonds. Bank rates will follow the bond market. Not pretty.

Long-Term Economic Forecast: Slow Growth and Deflation

Submitted by Fountainhead on Sat, 03/21/2009 - 01:15.

There are some heavyweight financial advisors who predict the deflationary cycle will remain in the long-term and we will not move into a Weimar inflationary cycle ... excelllent new article from Gary Shilling at www.marketoracle.co.uk/Article9470.html

Deflation, then inflation.

Submitted by Kevin Tuma on Fri, 03/20/2009 - 19:58.

I would never trust any large amount of money to be held in cash (FRNs). The bottom will drop out and within two years, we'll have hyperinflation. Any cash at that point will collapse in value dramatically.

A lot of people will be badly hurt by that, because people will respond, logically, to a depression by spending less and saving their money.

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SUPPORT OUR FOUNDERS' AMERICA
Support the Constitution of the United States

TIPS

Submitted by Bonhomme Richard on Fri, 03/20/2009 - 20:29.

Treasury Inflation-Protected Securities (or TIPS) are the inflation-indexed bonds issued by the U.S. Treasury. These securities were first issued in 1997. The principal is adjusted to the Consumer Price Index, the commonly used measure of inflation. The coupon rate is constant, but generates a different amount of interest when multiplied by the inflation-adjusted principal, thus protecting the holder against inflation. TIPS are currently offered in 5-year, 10-year and 20-year maturities. 30-year TIPS are no longer offered.

Damn Richard...

Submitted by loyaltothecrazyuncle on Sat, 03/21/2009 - 00:11.

you sound like a walking accounting professor. I think that I'll just put my FRNs back into my gardens and animals. One has to eat you know.
Semper Fi.

Poor Richard says

Submitted by Bonhomme Richard on Sat, 03/21/2009 - 10:43.

That's cool.

Me, U.S. Treasury's means the crazy uncle owes me, not the other way around.

S/F

For crying out loud!

Submitted by ThePlumber on Sat, 03/21/2009 - 00:03.

Why would you give the government more of your money? Haven't they stolen enough from you yet?

STOP FEEDING THE BEAST!

The Plumber

—

The Plumber

Take the time

Submitted by Bonhomme Richard on Sat, 03/21/2009 - 10:49.

and see TIPS are an inflation hedge !

So should I

Submitted by punjabimunda on Fri, 03/20/2009 - 20:09.

So should I buy in after 2 years, and keep in cash up to that point?

WHEN THE FED STARTED

Submitted by SIERRAHPBT on Sat, 03/21/2009 - 18:56.

WHEN THE FED STARTED monetizing the debt, did you see what happened to the dollar?? and you stillo want to hold cash?

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

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“A prudent man foreseeth the evil, and hideth himself: but the simple pass on, and are punished.” (Prov. 22:3; 27:12 KJV)

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