HIGH INFLATION WILL EAT YOUR POTENTIAL SAVINGS

[waiting hawk]

“In the last ten weeks the Canadian dollar has risen by over 10% against the greenback. That’s about one percent per week – incredible! With the weakness in the U.S. economy becoming increasingly apparent overseas, and global interest rates continuing their ascent, it will not be much longer before foreigners pull the plug on the dollar. When they do, it’s the American economy, and Wall Street’s phony rally, that will go down the drain.”

http://www.europac.net/newspop.asp?id=8761&from=home

[waiting hawk]

“In the last ten weeks the Canadian dollar has risen by over 10% against the greenback. That’s about one percent per week – incredible! With the weakness in the U.S. economy becoming increasingly apparent overseas, and global interest rates continuing their ascent, it will not be much longer before foreigners pull the plug on the dollar. When they do, it’s the American economy, and Wall Street’s phony rally, that will go down the drain.”

http://www.europac.net/newspop.asp?id=8761&from=home

[lniles]

Foreign bank accounts? Has anyone put their money in a non-US bank? What kind of interest do you get? What kind of exchange rate do you get?

[lniles]

Foreign bank accounts? Has anyone put their money in a non-US bank? What kind of interest do you get? What kind of exchange rate do you get?

[barnaby33]

Somehow Hawk I don’t think its that simple. A flight from the dollar means a flight from the, “customer of last resort.” Until I see China our financier of last resort really change its behaviour I don’t see the dollar tanking in a sudden fell swoop. That is not to say I don’t see it getting weaker.

Its begun, but slowly. As a corollary to whats coming (inflation), what interest rate would each of you require to buy 10 year treasury bonds (5%, 7%, 12%)? When our creditors stop lending cheap the US govt isn’t going to all of a sudden stop borrowing.

Josh

[barnaby33]

Somehow Hawk I don’t think its that simple. A flight from the dollar means a flight from the, “customer of last resort.” Until I see China our financier of last resort really change its behaviour I don’t see the dollar tanking in a sudden fell swoop. That is not to say I don’t see it getting weaker.

Its begun, but slowly. As a corollary to whats coming (inflation), what interest rate would each of you require to buy 10 year treasury bonds (5%, 7%, 12%)? When our creditors stop lending cheap the US govt isn’t going to all of a sudden stop borrowing.

Josh

[kev374]

doesn’t interest rates rise lockstep with inflation? If so, higher interest rates should keep the value of savings in the bank.

[kev374]

doesn’t interest rates rise lockstep with inflation? If so, higher interest rates should keep the value of savings in the bank.

[bubble_contagion]

In 1994, when the Mexican Peso devaluated abruptly, interest rates shot to 70%. Currently they are around 10%-12% but today the Peso is strong against the U.S. Dollar so those 12% are real!

[bubble_contagion]

In 1994, when the Mexican Peso devaluated abruptly, interest rates shot to 70%. Currently they are around 10%-12% but today the Peso is strong against the U.S. Dollar so those 12% are real!

[Nancy_s soothsayer]

When I started buying prime fishpond lands and developing large ponds in an Asian country in 2005, the exchange rate was (Peso)56.00 to a U.S.Dollar. I bought 3.5 hectares or about 8.4 acres. Now the exchange rate is 46.00 to one. The prices of land have also skyrocketed during that time period. The fishponds are now producing fat, delicious tilapias, gouramis, and mudfish feeding a small barrio.

[Nancy_s soothsayer]

When I started buying prime fishpond lands and developing large ponds in an Asian country in 2005, the exchange rate was (Peso)56.00 to a U.S.Dollar. I bought 3.5 hectares or about 8.4 acres. Now the exchange rate is 46.00 to one. The prices of land have also skyrocketed during that time period. The fishponds are now producing fat, delicious tilapias, gouramis, and mudfish feeding a small barrio.

[KIBU]

Thanks for all your very thoughtful comments. I really respect this website and the friendly and very knowlegeable posts here. I learn a lot.

There are a few assumptions that I wish to address.

Assumption #1: if inflation rise, the fed will raise rate.

When inflation rises, there is an increased risk that at a certain critical point foreign investors/governments will turn away from the US economy/treasury at a significant cost to themselves as well although lower. This would cause havoc for the US dollar and economy.

However, if interest rate increases further, one sure thing will happen is the further collapse of the housing market. The risk of this leading to a recession is very high.

In the face of a problematic housing market, what the fed will try to do is to delay increasing rate as long as possible to sail through the housing market problem with the least harm to the economy. This manuever will be at the expense of increasing inflation by not raising interest rate properly.

I believe they do this because they believe the US has room to manuever. That is, to allow increased inflation without comming too close to the critical point triggering outflow of investments. As the world balance between the risk and many benefits of their US investments (which they have been dependent on for a long time), the Fed will play their balancing act.

But it is you and me who will suffer as our cash value will evaporate. Holding no physical assets, only cash or some stock investments like me is no hedge against high inflation.

I hope I will continue later!

[KIBU]

Thanks for all your very thoughtful comments. I really respect this website and the friendly and very knowlegeable posts here. I learn a lot.

There are a few assumptions that I wish to address.

Assumption #1: if inflation rise, the fed will raise rate.

When inflation rises, there is an increased risk that at a certain critical point foreign investors/governments will turn away from the US economy/treasury at a significant cost to themselves as well although lower. This would cause havoc for the US dollar and economy.

However, if interest rate increases further, one sure thing will happen is the further collapse of the housing market. The risk of this leading to a recession is very high.

In the face of a problematic housing market, what the fed will try to do is to delay increasing rate as long as possible to sail through the housing market problem with the least harm to the economy. This manuever will be at the expense of increasing inflation by not raising interest rate properly.

I believe they do this because they believe the US has room to manuever. That is, to allow increased inflation without comming too close to the critical point triggering outflow of investments. As the world balance between the risk and many benefits of their US investments (which they have been dependent on for a long time), the Fed will play their balancing act.

But it is you and me who will suffer as our cash value will evaporate. Holding no physical assets, only cash or some stock investments like me is no hedge against high inflation.

I hope I will continue later!

[bubble_contagion]

You assume the housing market is problematic across the USA. The Feds will not try to save the housing market instead of the U.S. Dollar because, on a national average, housing is not extremely overvalued. It is bubble markets like San Diego that will be toast since the Feds couldn’t care less about a few people that bought overpriced properties in a few cities.

Having said that, I would recommend to move that cash to other currencies or assets.

[Author]

Posts