Who Doesn’t Love a Lesson in Inflation?

9 Replies to “Who Doesn’t Love a Lesson in Inflation?”

1. So, are you saying “lock-in”, or stay variable (or ARM as I believe you Merkins’ say)?

2. Stay variable and double-up IMO.

3. Hockey stick !

4. Captain, you just wrote a “conspiracy theory” in the eyes of leftards everywhere.

5. Uh,no.
   The prior experience of Brazil and Argentina teaches otherwise. Both had turned their domestic currencies into “real money with stable value” after decades of printing up lots of play money for the plebes while keeping US$ foreign currency “in responsible hands”.
   But one not so fine day Brazil had a problem, trade slowed down and the choice was either cope with some increase in the already untidy social unrest until things hopefully got better or go back to the printing money con job with lots of local currency inflation. Plan B was chosen of course.
   Argentina was made of sterner stuff and soldiered on with solid currency which was great at first because you could buy tons of cheaper stuff coming in from Brazil. But then nobody was buying the more expensive locally made goods and people lost their jobs. So the currency was devalued to make the economy more competitive and those who had kept their faith in government promises were swindled one more time.
   Canada will play Argentina and the USA will be Brazil in the next episode. It ain’t gonna be pretty. Perhaps inflation adjusted bonds for safety until they are declared illegal and seized.

6. I’ve been saying that for 3 or 4 years here, but no one seems to believe me.
   From Richard Russell’s “Dow Theory Letters”:
   The 10-year Treasury hit a yield of 3.83% yesterday… Now that might not sound too high, but at year-end 2008, a mere 5 months ago, the 10-year’s yield was 2%… And if you just keep bringing more supply after more supply to the markets, they are going to demand that those yields get even higher!
   “And let me remind you that as the yield on a bond goes up, the price of the bond goes down! So… For example… At 2%, the price was 110.08… And at 3.83%, the price is 94.20… ”
   Now, for all of those who did not study finance, the yield on the 10-year US bond is often equated to the “risk free” yield. So, apparently, risk free means losing 25% of your capital in six months.
   Don’t get me wrong – I think most American people whose middle name isn’t Hussein are genuinely warm and decent people. But, right now, I don’t think you can do better than to short America until the mid-term elections.

7. It is funny how Canada and Europe are starting to lean center right at the moment when we Americans are going off on a left wing bender. I look at it this way. Suppose you have been sponging off your brother in law for decades, for example, artificially keeping the value of your currency low enough to influence balance of trade in your favor, spending the re… err, I mean sitting on the couch watching TV, and doing occasional odd jobs for drinking money while he goes off to work each day to keep a roof over everybody’s head. Then one day, your brother in law decides the couch looks pretty comfy, grabs the remote, and starts stealing your beer, and BTW, stops going to work, and lets someone else worry about the mortgage without ever specifying who. My bet is that you start looking for a real job pretty quick.

8. (I barely read the paper when I wrote for it, and don’t do so at all, now.)
   Pretty much self explanatory

9. tim in Vermont: Oh so true! You would be surprised how many Canadians think their debt is half that of Americans on a per capita basis. When times get tough (and they will), everyone who has been backstabbing America will become your best friend. The sad reality of socialism is that it saps the strength of the population to the point I think of no return. Canada went thru that in the ’70s & 80s and has never really recovered.