Risk of hyperinflation serious now?

[dumbrenter]

If you are sure that hyperinflation is coming, the best thing to do is to put all your wealth that you have into immovable property & other hard assets. Maybe even take out big loans because those loans will not even be worth a loaf of bread in near future.

Me on the other hand betting the opposite; staying away from hard assets and gladly paying rent on a property where the landlord (betting on inflation) is net net renting to me at a loss.

[sd_owner]

Hyperinflation is possible, but is unlikely. The manufacturing jobs have left US, with little hope of coming back because the entire supply chain is gone now. Outsourcing has now moved to the skilled workers. We will not see wage inflation anytime soon. Without wage inflation, price inflation is unlikely to happen.

The stratospheric home prices in China have started to descend. Although the government there is very powerful, the economy will still be impacted by falling home prices. The number of wealthy Chinese who have been coming to US to buy homes with cash is decreasing. CA home prices will likely start to go down again soon.

However, if you have tons of cash in the bank, it is not a bad idea to invest in real estate. Although CA real estate is over-priced, there are many places in the US where home prices are quite reasonable.

[The-Shoveler]

These Jobs will most likely not be your typical manufacturing job, they will require mid level skills.

Also there is a growing push to raise lower wage levels,

U.S. a ‘rising star’ of global manufacturing

http://www.reuters.com/article/2014/04/25/us-usa-manufacturers-costs-idUSBREA3O0AW20140425

[sd_owner]

With the current economic policies, it will be hard for US to keep these jobs even if they are created here. As soon as these products get exported to China, the manufacturing will gradually be moved there. China’s central and local governments are heavily involved in economic activities. When a foreign company wants to sell products in China, they will require the company to gradually produce the parts locally. That is why almost all cars (Mercede, Audi, BMW, VW, GM, Ford, Toyota, Hyundai, Nissan, etc) sold in China are produced in China.

Another major reason that US is unlikely to keep manufacturing jobs is our tax policies. For example, China uses VAT (Value Added Tax). When someone imports a product into China, the customs immediately collects a tax of 17% VAT plus product-specific import taxes. Unlike US, they use local value and add shipping fees when calculating the import tax. As a results, the import tax collected by the customs is frequently over 40%. In contrast, US frequently collects 0% import tax on many products (e.g. electronics). It is quite difficult to compete against China for manufacturing jobs.

[spdrun]

Also there is a growing push to raise lower wage levels,

Exactly. So they’ll automate the low-enders’ jobs away instead of paying higher wages, or hire fewer and rely more on automation. Don’t have to pay ’em if they’re on unemployment.

[The-Shoveler]

Anything that can be automated WILL be automated regardless.

[HenryPP]

I have to question slightly the basis of the original question.

People get all alarmist about things like hyperinflation, market crashes, etc. Because these things are dramatic and grab attention (and readers, which helps sell ads). The reality is usually much more complicated.

I will use the common definition of inflation as the increase in prices of items (not the official definition of an increase in the money supply), since that is how almost everyone uses the term.

Leaving aside 1970’s-style supply constraint shocks, the only way we can get significant inflation in prices of widely used goods is to either increase the incomes of the people who buy these items, or to increase the number of these people, or increase in their willingness to borrow to buy these items.

As I see it, the only people who still have the ability to buy (or borrow to buy) significantly more of things are the rich and upper middle class. The rest of American society is close to being maxed out.

So the main items that are going up in price are the things in demand by the ever-richer rich and upper middle class. These are the people who have benefited in various ways from government actions and the modern economy.

So it is specifically the items with high demand by the rich and upper middle class which are seeing inflation and will likely to experience price increases.

What are these things?

-Higher education: The kids of the rich and upper middle class go to college. One way or another, through cash or loans, these kids will get that important status symbol – the college degree (and law degree/medical degree/MBA, whatever).

-Complex medicine: The rich and upper middle class like being healthy, and like their kids being healthy. Money will always be thrown at this problem. One way or another, money will be found to ensure this.

-Financial markets: The rich and upper middle class, along with the pension funds, hedge funds (for the really rich), etc, which cater to them, have enormous amounts to invest. And central banks are there to make sure their financial positions keep looking rosy for the foreseeable future.

-Luxury items and art investments, etc. These are things for the rich and wannabe rich. These people have money and/or ability to borrow to get these status symbols. Plus a lot of these investments have been going up, so there is a virtuous cycle which will keep going until/unless the rich/upper middle class get whacked by something. Central banks are there to make sure 2008 doesn’t happen again anytime soon.

I actually think that there is already very significant inflation going on in the economy. It is just in things beyond the “necessities” and which are not well captured by the CPI (probably deliberately – can’t let the COLA for ordinary folks get too out of hand, now can we).

But hyperinflation in the historical sense, with people pushing wheelbarrows of money bills to buy bread – no, I don’t foresee that at all. Instead, you push wheelbarrows of money to buy the items desired by the rich and upper middle class, especially if they are supply-constrained – the stocks of hot tech startups; luxury condos in the hippest cities; dinner at fancy restaurants; putting your kids through private colleges – that sort of thing.

So it is in the rich/upper middle class items where inflation is. For everything else, 99 Cent stores will welcome you with cheap made-in-China goods.

[paramount]

Are we talking about price inflation, monetary inflation or both?

[CA renter]

HenryPP, I would agree with most of what you say here, but “the rich” have also been buying the things that Joe Sixpack needs — commodities (agricultural, energy, etc.), and housing, for instance. There is a TON of speculation in these markets which is why prices have shot up when they *should have* gone down after 2008/2009. IMHO, we have been seeing the inflation, but the talking heads have been calling it “normalization” because they want J6 to think that high prices, like those seen during the bubble, are “normal.”

A lot of these trades are being made with leveraged money. At some point, the end products have to be sold or rented to the unwashed masses who’ve been seeing their pay go down while their living expenses have gone up. I think that will be the wall that causes the next crisis, but who knows when that will happen. Interest rates will definitely play a role. Maybe this is why we’re seeing the “increase minimum wage” movement get a foothold. Who knows?

[spdrun]

Anything that can be automated WILL be automated regardless.

Not as long as it’s cheaper to pay people to do it.

[sd_owner]

Increasing minimum wage will not lead to inflation, although people may think it will. This is because there is little pressure of wage increase on middle-class jobs due to globalization. Without wage pressure on middle-class jobs, the increase of minimum wage will essentially be a tax on the middle-class, just like the case of Obamacare.

[livinincali]

[quote=The-Shoveler]Anything that can be automated WILL be automated regardless.[/quote]

And that action tends to be deflationary. Better technology and efficiency let you do more with less input labor/energy. If you increase production without increasing costs through technology the natural outcome is lower prices for those goods.

[Author]

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