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Financial doom and other fairy tales
But we need to remember that while fairy tales may reflect real fears, they aren't reliable guides to how the world works. That's true whether the main character is named Snow White or Ben Bernanke.
That's my belief. I think things will be very bad but I can't go planning my life around absolute worst case. I'd be a basket case and there'd be little point. Worst case would see hyperinflation AND global war. I can't really protect myself from either of those. I'd therefore prefer to protect myself against the much more likely case (a lower standard of living as the global imbalances rebalance).
If doom is truly upon us, there's nothing we can do, and we might as well just keep on with our lives. If the doom can be avoided, as these books suggest, by something as simple as buying gold or real estate or inflation-indexed Treasury notes, then it's not much of a doom, and we will see forces come into play to change the direction of the economy before it runs off a cliff.
I bought my first house in 1997. I'm still living here. I bought gold and silver in 2004. I sold in 2006 (way too early in hindsight). Now my portfolio is sitting almost entirely in inflation-indexed Treasury notes and I-Bonds. I will clearly be better off long-term if the economy does not run off a cliff. Although I have some inflation protection, I will also be better off if inflation remains somewhat tame. In other words, I hope I have wasted money on inflation insurance (just like I hope I wasted money on fire insurance for my home, since I never wish to see my home burn to the ground).
I also go back to when I first turned bearish in 2004. It felt like we were borrowing the recovery. I had a big problem with that. Now we're trying to borrow the next recovery. I still have a big problem with that. Based on real median wages, neither recovery is doing all that well. In my opinion, one cannot borrow prosperity. At some point we'll need to pay it back. Based on the price of food and energy, I think we've reached that point.
ICE: Mortgage Delinquency Rate Increased Year-over-year in October
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From ICE: ICE First Look at Mortgage Performance: Serious delinquencies hit
17-month high while foreclosure activity remains historically muted
• At 3.45% ...
3 hours ago
6 comments:
Stag.
(a lower standard of living as the global imbalances rebalance).
It sure looks like this is the direction we are heading. At least on a relative basis. Even after the huge drop in the dollar, so many prices abroad are much more expensive than in the U.S.
I just don't see how we can inflate our way to prosperity when median real wages are not increasing. If American wages converge with Asian wages (as one might expect), inflation will obliterate family budgets. The bills will increase, but the income will be decline.
MAB,
We must be careful not to connect too many dots, lest we go mad.
http://en.wikiquote.org/wiki/H._P._Lovecraft
The most merciful thing in the world, I think, is the inability of the human mind to correlate all its contents. We live on a placid island of ignorance in the midst of black seas of infinity, and it was not meant that we should voyage far. The sciences, each straining in its own direction, have hitherto harmed us little; but some day the piecing together of dissociated knowledge will open up such terrifying vistas of reality, and of our frightful position therein, that we shall either go mad from the revelation or flee from the light into the peace and safety of a new dark age. - H.P. Lovecraft, 1926
Who knows the end? What has risen may sink, and what has sunk may rise. Loathsomeness waits and dreams in the deep, and decay spreads over the tottering cities of men. - H.P. Lovecraft, 1926
Talk about Great [Depression] timing. One wonders what this American author of fantasy, horror and science fiction would have written in 1999. Or even today for that matter? I should stress that it was a work of fiction though, mostly. In theory anyway. Well, you know.
Speaking of tottering cities, I think I'll post a glowing infrastructure report.
Stag,
We must be careful not to connect too many dots, lest we go mad.
It's a weird market. Commodities & stocks are going up. Earnings & purchasing power are going down. Inflation is painfully high, yet treasuries yields are frightfully low. Puzzling to me. Maybe people just believe in re-flation. The reaction to the FNM news sure seemed like a vote for inflation. Trouble is, it's not just in assets this go round.
I still see inflation trumping deflation. My bills certainly aren't shrinking.
Pickman's Model...but now it is an economic model!
energyecon,
Pickman's Model...but now it is an economic model!
Pickman's Model Homes!
Pickman's Model
http://en.wikipedia.org/wiki/Pickman%27s_Model
Pickman drew his inspirations not from a diseased imagination, but from real life.
Developer fallout spreads with Dunmore Homes
http://www.bakersfield.com/102/story/436336.html
At the northwestern corner, where Aquamarine Peak Drive approaches McCutchen’s current dead-end, three model homes stand amid lush landscaping like a miniature oasis.
More of the dots are being connected. We're very nearly...
In the House of Madness
http://en.wikipedia.org/wiki/In_the_Mouth_of_Madness
There it soon becomes clear that the wall between fantasy and reality has blurred.
Just as it became clear that the wall between illusion and "realty" has blurred! Oh the humanity! ;)
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