Why no massive inflation in the US yet?

tolly_67 said:
As for gold being a saviour....it was a long time ago when trading in coins made of gold and silver occured and you now have 2 generations that have no concept about it. Farming land and crops would be a saviour....not gold. It would take a massive shift in attitude for gold and silver to become prominent in the economy as a trusted method of exchange. We all know of its merits but we are a small minority.
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This is a very common but extremely western myopic view of the world.

To the Indians and Chinese, gold definitely still represents wealth and trading in gold is very common and well understood.
Together they make up the largest number of the world's population and are also the economies that are growing rather than shrinking.
 
This is true but the transition from gold to an exchange medium with anything other than one's own currency is extremely rare. Asians are very smart and understand the need to hold wealth in gold (22K and 24K) but they would be in the same boat as everyone else if their currencies collapsed and they needed some reference point to determine the rate at which a gram of gold should be exchanged with a tank of fuel etc.

Failure of the banking system is the biggest risk we face because without it, there is no world trade. For a tanker full of oil to leave the middle east, a note of credit will have to be exchanged between banks but this will fail if the bank writing the note of credit is declared insovent before the oil arrives. The whole banking industry will have to be redesigned to avoid this scenario. Oil is a relevent example because energy is what drives economies. without the oil there is no economy. The oil exporters may exchange for gold but there is no mechanism in place at the moment which can accommodate this.


As for the asian in the street, sure, they may have 2 grams of gold for a tank of fuel but it is no good if there is no fuel available due to the fact that the mechanisms that made fuel available have collapsed.
 
As far as I can tell then......keeping cash away from insolvent banks under the mattress or in a safe is the ONLY thing that is going to keep us alive (or farming) then if PM's wont do anything for us.

There are clips of some American guy on youtube talking about how pms will be useless and farming is the only thing that will keep everyone alive.
 
tolly_67 said:
Failure of the banking system is the biggest risk we face because without it, there is no world trade.
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The banks have really done a great marketing job about this all over the world haven't they ?


Failure of the existing banking system would only be temporary if it does happen.
Governments can very quickly nationalise banks and get them going again.
Governments can also step in and ensure crucial world trade like oil and food keep going.
What government would stand idly by and watch it's main industries just stop ?

Countries endure natural disasters of massive proportions and recover from them.
How have we come to believe bank failures would be so much worse ?


The concept of mad max style shtf scenarios where everything collapses is just fantasy.
 
I would like to think that you are correct.
The problem is that the politicians do not understand economies and have actually contributed far more than anyone else to the position we are in now.
It does not make much sense to entrust those that created the mess to find solutions to all the problems that are created.
If they can't understand the predicament we are about to face now then I have little faith in thier ability to deal with it in the future.

Nationalising banks would mean placing the debt burdens onto the taxpayer to save the bond holders. .....No thank you. This is something the bond holders would like.
Not all banks are the same however and very smart banks would see opportunity in this. I would not be suprised to see the rise of new Asian behemoth banks. They understand economies, capital flows and have access to enormous amount of investment money.
I doubt the mad max scenario also but I will not be suprised to if we endure a sustained period of panic while the smart players prepare to take the reins. I would be more confident in asian banks than any government.
 
tolly_67 said:
Nationalising banks would mean placing the debt burdens onto the taxpayer to save the bond holders. .....No thank you. This is something the bond holders would like.
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Also about this, I see alot talk in media about 'The Taxpayer' but people within a community and economy are not like either the one or the other. They are, in various degrees, both.
There is a simple economical reality: in the end, the producing population part pays it. Regardless whether they are taxpayers, bond holders, bank savers or any combination of these. And also regardless the way they pay it, more working pressure, bank savings devaluations in any form, (higher/extra) taxes / regulation cost, etc.
Nationalising banks or not actually means nothing in the aspect of who will end up paying a second time.
 
When a bank in Australia goes broke, the RBA steps in and requests (instructs) another bank take it over.

This happened with the State Bank of Victoria by the Commonwealth Bank, the Bank of Adelaide by the ANZ. The shareholders lost their money, but at that time the depositors did not.

I expect that step #1 in the future would be that the 'Four Pillars' would rapidly become the Two Pillars, maybe with the CBA and Westpac merging, and the NAB and ANZ also merging.

What would happen after that is just guesswork at this stage, but full nationalisation would entail paying market value for all the shares which may or may not be much.


OC
 
what would happen to our mortgages if the dollar collapsed and was worthless ? are we safe from the banks in that scenario ?
 
so if the dollar is worthless , so our our homes , correct ? then we have a pile of pms worth heaps and can pay em off ?
 
Old Codger said:
but full nationalisation would entail paying market value for all the shares which may or may not be much.
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It would not require the govt to buy any existing shares from existing shareholders so the market value is not relevant.
The bank can simply issue new shares to the govt for the money that is injected into the bank to keep it from declaring bankruptcy.
Those new shares would simply dilute any existing shareholders.

Listed companies staving off bankruptcy by issuing large numbers of new shares when their share price is very low, massively diluting existing shareholders, is very common.
Why should banks be any different ?
 
stinkypete said:
what would happen to our mortgages if the dollar collapsed and was worthless ? are we safe from the banks in that scenario ?
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The dollar will never be worthless - it will always be worth a dollar.
And your mortgage would still be the same as it is now in dollars.

How much of anything that dollar will buy you and how much your home might be worth and how much you might still earn is a completely different question.
 
My view is that the primary reason we are not seeing "massive" inflation in the US is because the world is on the edge of a depression. A major factor the bottom hasn't fallen out yet is because of the "massive" QE projects going on around the world. One can only imagine how bad things would be if we had gone to the Hoover solution or the increasingly marginalized pro austerity folks path of choice. Everytime a talking head goes to the cutting social programs game card it makes me smile as they haven't thought out their Strategy. Solid tactics do not make a winning strategy.

So as a result things are becoming bifurcated.

From my understanding there is a major difference between US and EU banks.

US banks have addressed their bottom lines and are now essentially "recapitalized" thanks to public bail outs.

EU banks have NOT addressed the bottom lines due to differences between the US and the EU system.

Thus we are looking at the EU testing new lows versus the USD.

The Japanese have already embarked upon their latest scheme to fix things without addressing the underlying problems which leaves the US as the best cut of meat at the butchers shop.

I put the majority of my fiat in USD and will ride its relative purchasing power higher. Then look to buy something of value in a currency that is of relative low value. Meanwhile I continue on my somewhat regular PM buying plan.
 
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