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Beware of all of the advice in this article, which boils down to: - take on debt - consume For when inflation reverses course, as it likely will, those debts

Beware of all of the advice in this article, which boils down to: - take on debt - consume For when inflation reverses course, as it likely will, those debts will become hard as a rock and you'll be paying back in a currency that relentlessly appreciates. All that stuff you bought but didn't need will fall in price. This is a good way to go bankrupt. The US Treasury market, the gold market, the trade weighted dollar index, and eurodollar futures are all signaling lower inflation and growth ahead. Before bracing for Weimar, be sure you're ready for USA 1980.

objektif 5y ago
Gold is not showing signs of lower inflation. It is simply being abandoned as a hedge against inflation. Retail investors are piling up on crypto currencies thinking that it is the new hedge against inflation.
- rmah 5y ago
  Crypto prices have stopped rising since inflation spiked up. So... not so much that retail investors are piling into crypto as an inflation hedge.
  - deleted 5y ago
    [deleted]
- hakfoo 5y ago
  I wonder if people are after a "hybrid hedge" -- not just asset preservation, but appreciation. Precious metals are sort of understood from a technical standpoint. We're unlikely to discover a 600-metre-diameter orb of pure gold in the middle of Nebraska, and, conversely, we're not going to suddenly double our industrial demand for it. Once you strip out the "civilization will crumble and you'll have to use Krugerrands to buy ammo for your Mad Max-converted Prius" crowd, the hedge case for gold is more or less "Gold has a practical ceiling somewhere around 2000-inflation adjusted USD per ounce, and will stay near there indefinitely. Buy at 1800 today and hold it to avoid exposing yourself to dollar-denominated assets." Boring. In contrast, crypto offers the appeal of avoiding direct dollar exposure, with the excitement of speculation. If it turns out we build the next financial ecosystem on the random token you've chosen to back, there's way more upside than just "avoiding dollar risk." TBH, a lot of it is very stupid money chasing the moon though. A lot of people have had their risk tolerances out of whack for a long time. I suspect too-big-to-fail and the political mentality that if the S&P 500 goes down, the world ends may have reinforced this attitude, so we see people being more speculative than would be prudent.
WanderPanda 5y ago
Great comment! Can you also read the implied variance from the prices? What I mean by this is: Is the probabability of a deflation ala 1930-1933 being weighted against a Weimar hyper inflation scenario resulting in a seemingly stable mean prediction?
treis 5y ago
Its hard to separate demand & supply shocks from inflation. Like energy is way up compared to last year, but last year demand was depressed due to Covid. Same with cars, appliances, furniture and so on. Necessities like food and clothing and so on have inflated at a much more moderate rate.
bshipp 5y ago
USA 1980 inflation was stopped by spiking interest rates. What probability would you assign to the current Federal Reserve ever having the fortitude to do something similar? I would place that at less than 5%. The entire financial house of cards collapses before the interest rate leaves single digits. I know everyone thinks this inflation is a short-term shock due to COVID, but every customer and supplier I've talked to is seeing insane markups in all inputs. If anyone thinks these companies are going to quickly give back those price increases after finally seeing them for the first time in forever, I have some bad news for you. What started as a transient inflationary shock might end up being more persistent than anticipated.

objektif 5y ago

Gold is not showing signs of lower inflation. It is simply being abandoned as a hedge against inflation. Retail investors are piling up on crypto currencies thinking that it is the new hedge against inflation.

rmah 5y ago
Crypto prices have stopped rising since inflation spiked up. So... not so much that retail investors are piling into crypto as an inflation hedge.
- deleted 5y ago
  [deleted]
hakfoo 5y ago
I wonder if people are after a "hybrid hedge" -- not just asset preservation, but appreciation. Precious metals are sort of understood from a technical standpoint. We're unlikely to discover a 600-metre-diameter orb of pure gold in the middle of Nebraska, and, conversely, we're not going to suddenly double our industrial demand for it. Once you strip out the "civilization will crumble and you'll have to use Krugerrands to buy ammo for your Mad Max-converted Prius" crowd, the hedge case for gold is more or less "Gold has a practical ceiling somewhere around 2000-inflation adjusted USD per ounce, and will stay near there indefinitely. Buy at 1800 today and hold it to avoid exposing yourself to dollar-denominated assets." Boring. In contrast, crypto offers the appeal of avoiding direct dollar exposure, with the excitement of speculation. If it turns out we build the next financial ecosystem on the random token you've chosen to back, there's way more upside than just "avoiding dollar risk." TBH, a lot of it is very stupid money chasing the moon though. A lot of people have had their risk tolerances out of whack for a long time. I suspect too-big-to-fail and the political mentality that if the S&P 500 goes down, the world ends may have reinforced this attitude, so we see people being more speculative than would be prudent.

WanderPanda 5y ago

Great comment! Can you also read the implied variance from the prices? What I mean by this is: Is the probabability of a deflation ala 1930-1933 being weighted against a Weimar hyper inflation scenario resulting in a seemingly stable mean prediction?

treis 5y ago

Its hard to separate demand & supply shocks from inflation. Like energy is way up compared to last year, but last year demand was depressed due to Covid. Same with cars, appliances, furniture and so on. Necessities like food and clothing and so on have inflated at a much more moderate rate.

bshipp 5y ago

USA 1980 inflation was stopped by spiking interest rates. What probability would you assign to the current Federal Reserve ever having the fortitude to do something similar? I would place that at less than 5%. The entire financial house of cards collapses before the interest rate leaves single digits. I know everyone thinks this inflation is a short-term shock due to COVID, but every customer and supplier I've talked to is seeing insane markups in all inputs. If anyone thinks these companies are going to quickly give back those price increases after finally seeing them for the first time in forever, I have some bad news for you. What started as a transient inflationary shock might end up being more persistent than anticipated.