Are savers doomed?

[Anonymous]

[quote=CA renter]You can also look to Greece, Spain, Portugal, etc. when deflation started setting in there. What was happening to their bond markets/interest rates? And remember that those were nominal interest rates. Real rates were even higher.[/quote]

Good points. You should definitely advise the grandmas on fixed incomes to invest in bonds issued by “Greece, Spain, Portugal, etc.” After all, they pay such high rates!

[quote]You are only looking at the central banks’ *responses* to deflation.[/quote]

I’m only looking at the nonsense that is posted here because I find it to be mildly amusing.

[quote]Can you bring any actual data, statistics, facts, or logical arguments to refute what I’m saying?[/quote]

No need. You do that pretty well yourself, often within the same post.

[Anonymous]

[quote=CA renter]Pri,

Here you go, Mr. Smartypants…

[cites from random, obscure sources on the internet along with confused “analysis” of based on a few snippets taken out of context]

Exactly which part of this do you not get?[/quote]

I don’t get why you were awake ’till 3am googling the word “deflation.”

[FlyerInHi]

CAr, after all this, are you saying savers are doomed because of the Fed, and because the value of their assets will come crashing down, below what they originally invested + inflation?

[CA renter]

[quote=harvey][quote=CA renter]You can also look to Greece, Spain, Portugal, etc. when deflation started setting in there. What was happening to their bond markets/interest rates? And remember that those were nominal interest rates. Real rates were even higher.[/quote]

Good points. You should definitely advise the grandmas on fixed incomes to invest in bonds issued by “Greece, Spain, Portugal, etc.” After all, they pay such high rates!

[quote]You are only looking at the central banks’ *responses* to deflation.[/quote]

I’m only looking at the nonsense that is posted here because I find it to be mildly amusing.

[quote]Can you bring any actual data, statistics, facts, or logical arguments to refute what I’m saying?[/quote]

No need. You do that pretty well yourself, often within the same post.[/quote]

As always, you’ve got nothing. Why are you so insistent on broadcasting your ignorance? If you weren’t so obsessive with the personal attacks, I’d go easier on you. But you really ask for it…no, you beg for it.

[CA renter]

[quote=FlyerInHi]CAr, after all this, are you saying savers are doomed because of the Fed, and because the value of their assets will come crashing down, below what they originally invested + inflation?[/quote]

Savers and people on fixed incomes (including workers) are in one category; investors (and speculators) are in another. One benefits from asset price deflation, the other benefits from asset price inflation.

Savers can be investors, too, but they don’t have to be.

[CA renter]

[quote=harvey][quote=CA renter]Pri,

Here you go, Mr. Smartypants…

[cites from random, obscure sources on the internet along with confused “analysis” of based on a few snippets taken out of context]

Exactly which part of this do you not get?[/quote]

I don’t get why you were awake ’till 3am googling the word “deflation.”[/quote]

No, I often work at night. And I already knew about deflation’s effects on interest rates, as stated in my other posts. The Googling was for you. It was an easy, 2-minute search that you’re obviously incapable of doing for yourself.

[edited to add]: OMG!! I just noticed what you wrote in brackets. You have got to be kidding me! You’re claiming that the Federal Reserve, the National Bureau of Economic Research, and Grant’s Interest Rate Observer are “random, obscure sources”?!?!? There is no hope for you.

And it’s clear you haven’t even read the articles and research papers, yet you want to claim that that I am guilty of “confused analysis”? Wow!

No offense (okay, take offense), but you are truly stupid and uninformed. I had always thought it was a bit of a ruse on your part to help facilitate your trolling, but now I know that you truly don’t know what you’re talking about.

[FlyerInHi]

You didn’t answer the question, CAr.

The way I read your comments about the Federal Reserve is that everything that they do will turn out in vain. That there are some organic forces that will reset everything in the end.

Plus you keep on claiming that, long term, deflation will prevail.

Please detail how all your prediction will play out, for example for someone who has $100,000 in savings today.

[CA renter]

[quote=FlyerInHi]You didn’t answer the question, CAr.

The way I read your comments about the Federal Reserve is that everything that they do will turn out in vain. That there are some organic forces that will reset everything in the end.

Plus you keep on claiming that, long term, deflation will prevail.

Please detail how all your prediction will play out, for example for someone who has $100,000 in savings today.[/quote]

This is an incredibly complex issue with many moving parts. I’m not saying that the Federal Reserve is powerless in all ways or in every case, but with the situation that we have now, their policies are making things worse, not better. Fiscal policy is more important than monetary policy in this particular case, though combining the efforts of both Federal reserve and government institutions would be optimal with the government having ultimate control. Flooding the already wealthy/powerful with more even more money/power when the PROBLEM is extreme wealth/income (and power) inequality will only make things worse…much worse.

Unlike you, I am not of the belief that debt doesn’t matter…not unless you’re talking about accepting a total currency collapse, and choosing to knowingly taking that path.

As for the last part of your post, if a person with $100,000 cash today remains in cash, I believe that they will continue to lose purchasing power with every year that the Federal Reserve is manipulating interest rates and money supply. At some point, though, I believe this will all collapse, and if the currency survives, those holding cash — assuming it’s in a safe place — will probably benefit in the long run. But all of that is a guess, and depends on whether or not our currency can survive such an event, and how the institutions holding the money survive the event as well.

[FlyerInHi]

CAr, I’m now more clear about your position.

Sounds like you want deflation because that would help people on fixed income.

But, in the medium term, you worry most about inflation (currency collapse).

In the long term, if “our currency can survive such an event” (I’m assuming a near collapse), then we will see deflation and the Dollar will be worth more than today.

I still don’t understand how we’d eventually end up with paper Dollars worth more than today after surviving a near collapse event. In my mind, currency collapse means the Dollar is worth less and less until nobody wants it anymore.

[Anonymous]

[quote=CA renter]OMG!! I just noticed what you wrote in brackets. You have got to be kidding me! You’re claiming that the Federal Reserve, the National Bureau of Economic Research, and Grant’s Interest Rate Observer are “random, obscure sources”?!?!? There is no hope for you.[/quote]

lol, Grant’s Interest Rate Observer

http://i1.kym-cdn.com/entries/icons/original/000/008/273/doom_paul_1.png

RON PAUL 2012!!!!!!!!

[CA renter]

[quote=FlyerInHi]CAr, I’m now more clear about your position.

Sounds like you want deflation because that would help people on fixed income.[/quote]

Correct.

[quote=FlyerInHi]But, in the medium term, you worry most about inflation (currency collapse).[/quote]

This is a a general concern of mine…that savers and people on fixed incomes (that’s most people in this country because it includes workers, pensioners, people on public assistance, etc.) will continue to lose purchasing power over time for as long as the Fed is pushing for higher inflation and monetary expansion (with most of that going toward speculation instead of more productive investments).

Obviously, tax and trade policies are hurting these people as well. They are being hit from all sides.

[quote=FlyerInHi]In the long term, if “our currency can survive such an event” (I’m assuming a near collapse), then we will see deflation and the Dollar will be worth more than today.

I still don’t understand how we’d eventually end up with paper Dollars worth more than today after surviving a near collapse event. In my mind, currency collapse means the Dollar is worth less and less until nobody wants it anymore.[/quote]

No, a currency collapse tends to be inflationary (even hyperinflationary), not deflationary. This is when the currency loses the most value. When I said, “if our currency can survive such an event,” I meant that if the currency can survive the inflation and the resulting collapse/deflation (IF the deflation can happen), then it might be worth more at the end. But most currencies don’t survive — their money is exchanged to a new currency worth a fraction of their old currency…and this can happen multiple times in a row. People who hold hard assets like real estate are the most likely winners, though in some cases, you will see reforms put in place that redistribute land when these collapses happen. Ultimately, there is no safe place when currencies are manipulated like this.

That is what scares me most: that so many people who did nothing to create this mess — people who tried to be as conservative and prudent as possible — will end up carrying the burden for a long, long time, possibly for generations.

[livinincali]

[quote=CA renter]
No, a currency collapse tends to be inflationary (even hyperinflationary), not deflationary. This is when the currency loses the most value. When I said, “if our currency can survive such an event,” I meant that if the currency can survive the inflation and the resulting collapse/deflation (IF the deflation can happen), then it might be worth more at the end. But most currencies don’t survive — their money is exchanged to a new currency worth a fraction of their old currency…and this can happen multiple times in a row. People who hold hard assets like real estate are the most likely winners, though in some cases, you will see reforms put in place that redistribute land when these collapses happen. Ultimately, there is no safe place when currencies are manipulated like this.

That is what scares me most: that so many people who did nothing to create this mess — people who tried to be as conservative and prudent as possible — will end up carrying the burden for a long, long time, possibly for generations.[/quote]

Iceland’s 2009 currency crisis is a decent case study because it’s fairly easy to get historical data on want happened. In a nut shell this is what happened.

1) Currency collapsed by about 50% relative to the US Dollar/Euro
2) Inflation went up to 20%
3) Interest Rates went up to 18%
4) Home prices lost about 20% measured in Krona
5) Stock market declined by 95% measured in Krona

So in the nutshell the best place to be when Iceland had a currency crisis was to be in some foreign currency or investment. The next best place to be was in cash. The worst place to be was in the stock market or other assets like houses that are priced based on the availability of leverage. The problem with a currency crisis is that interest rates go sky high so that hits assets that rely on the availability of leverage. So you have consumer price inflation but that doesn’t translate into higher home prices.

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