Finally Some Stability?

I agree, Hock. From my viewpoint, I still see 2013-2015 as a VERY dangerous time for the world economy. If there is to be a depression around the whole world and perhaps the crash of the various fiat currency systems, this is the time I can see it happening.

The Europeans seem to be putting band-aids on their problems and the US isn't even doing that. I guess that we are simply hoping that things will magically change for the better at some point.

Sooner, rather than later, all this money printing WILL create a lot of inflation. We are already seeing the leading edge of it now. Such things tend to be really big and also tend to start slowly, build faster and faster, and finally result in a HUGE problem that is, at last, obvious to one and all. We seem to be in the early part of that cycle.

Money printing is one of those things that solves a problem or two in the short run but which also creates a few more bigger and uglier problems for the long run. Inflation is a terrible thing to release on one's citizens. It lowers their standard of living and reduces the value of their savings. If I wanted to achieve that, I would spend a week or two in Las Vegas. At least with that, I would have a little fun before the money ran out. :-/

The only way I can see disaster being averted would be if the central banks around the world would stop propping up failed businesses and countries and just let them die financially. Otherwise, they are sending good money after bad and the only question there is, how many more billions will they waste before finally grasping the thought that they are on a fools' errand? I don't know. Bernanke doesn't seem to grasp this and neither have any of the recent Sec. Treas. guys. With them, the answer is always the same, prop 'em up and bail 'em out. This is really idiotic policy, IMO.

The central banks would also have to sop up most of the excess liquidity that is sloshing around the world's financial systems and there seems to be no nerve for that move either.

If I make a stupid decision with an investment, guess who suffers the consequences of that? Me, that's who. And that is the right person to blame for the problem. I don't get bailed out and I shouldn't get bailed out when I behave stupidly, so why should the banks, auto companies, or the socialist countries who are finally out of other people's money? At least, they would be if the central banks would stop pouring in tax-payer money from other countries to prop them up.

None of this propping up solves the real problem. It is basically an attack on the symptoms while the real problem escapes to cause more trouble in the future. The real problem is that living beyond one's means is not sustainable and we ALL have to recognize that and then ACT so that it is not happening. We should start at home with that, of course, and lead by example. Unfortunately, we don't seem to have any real leaders here who are willing to do what is necessary to solve our financial problems. It will be painful and there is no way around it. There is no pain-free silver bullet that can solve this problem. The longer we put off solving our financial problems, the bigger and more difficult to solve they will get. Cowardly politicians seem to delight in putting off such decisions until they are safely retired or dead. I guess that they misunderstand the part of their job description that says they are there to fix the really difficult problems.

When these bailouts started, I said it was idea. Mismanaged businesses have no place here. I'm a small business owner myself and there was a time when I thought all was a lose. There wasn't a bailout for me. I had to decide what I wanted: stay my own boss or work under someone else. I worked my tail off to stay afloat and I'm still in business after 26yrs. The only way to help our economy is to let these businesses that are dieing, die.

I almost 100% agree with Ed's take on things.

The one area that I think he may be off is the time frame. It generally takes about 2 years for any changes in the money supply (like printing fiat money out of hot air) to begin showing in the everyday prices of consumer goods.

The inflation we are seeing now (seemingly about 35% per year), therefore, dates back to the fall of 2009. In early 2010 the POTUS double turbo-charged inflation with the passing of Obamacare. Those numbers should start coming home to roost early next year.

I have no idea how bad that will be. However, I do know that the price of my business consumables are up about 25% in the last year. And my raw material costs are up OVER 100% (not a typo) in the last year. Likewise, many of the items I sell are up OVER 500% (again, not a typo) in the last 4 years.

I had a customer today looking for a driven speedometer gear. Seven years ago he could have bought it from Chrysler for under $10. Today Chrysler wants $90 for it. My price is $25, more than double what I would have sold it for just 3 years ago, and based on Chrysler's price my price is too low, yet the customer was able to buy it from one of my competitors for $1.95. No one really knows the real price of that gear anymore.

I also have a Ford lever in will call waiting for payment. Seven years ago Ford sold them for $6 each. Today they want $200 each. Mine is going out the door at $25 plus shipping, which the customer says is way too low. Things are getting crazy.

Anyhow, I don't know how much inflation, but I see it really beginning to gather a head of steam beginning about the end of the year.

Typically, prices in my business crash about Easter into late summer. This year prices held steady or increased. This is the FIRST time in the 30 years of being in business that prices did not drop off the cliff, though in 2008 the cliff was not very high. That bodes very very badly for inflation in the next year. Based on those 30 years of history, I am projecting that by next Easter everything I buy or sell will be DOUBLE or higher than what it is today. Will it happen? Don't know. But based on what has happened in the past, it sure looks that way. And all business decisions are being based on that projection.

If I am correct, the seller of the $1.95 gear is going to be in a severe cash squeeze within a year unless he starts selling his parts at a break-even price or better instead of at a loss. In fact, a whole slough of businesses will be in a cash crunch should inflation take off that fast.

The real crunch will be with Obama. If his inflation comes home next year like I think it will, you can look for him to slap price controls on goods and services in a vain hope to stop the carnage and to salvage votes for the 2012 elections. Price controls would take a ruined economy and destroy it, but probably not visibly destroying it before the election.

If you want to estimate the inflation rate, divide the total money supply next year by the total money supply this year. The number won't be exact, mainly because the total goods and services available are assumed to be the same, which they won't be. However, it will give you a reasonable estimate to show you how high prices can rise.

I could go on, but this should be enough to digest at one time.

Scary times Ed and mmerlinn are painting but I also agree. No painless solutions are there... That's part of the problem, no immediate painless fixes so we end up digging deeper and deeper holes. Just hope I build up enough PMs to build a ladder out

Not trying to frighten anyone, just calling 'em as I see 'em. Unlike the politicians, I have no ax to grind and am not selling anything. I do like history and have read a fair bit of it, though. Lots of parallels exist between the economic situation of today and the 1930s. Fact is, it is a LOT closer comparison than any of the pols or other government types want us to know. This is why they are cooking the numbers to show 1/2 of the unemployment and 1/3 of the real inflation rates. I agree that there are no painless solutions available to us and it is a waste of valuable time to look for them. I see huge problems in the same way that I see an incoming meteor. When it is far away, a small nudge can deflect it enough so that it will not hit the Earth. The closer it gets, the greater becomes the force needed to deflect it. At some point, it is too close and too powerful to be deflected and impact is inevitable. In this context, distance in space to the meteor and time until financial collapse are similar commodities. Neither can be wasted if a viable and acceptable solution is to occur. Yet, this is exactly what our so-called leaders insist on doing... delaying the inevitable austerity that is required to fix this huge financial problem.



I guess that I am not seeing your point on this. The financial meltdown and money printing started in late 2008 / early 2009. It is now about 3 years after that began and it is now continuing under the guise of "Twist". We are seeing inflation now but it is not an over-all inflation. Some things have inflated hugely while others have not. The Fed continues to include housing in their inflation numbers because it reduces the amount of inflation they calculate. They do not include food and fuel because that would increase the amount of inflation their formula calculates. When would you expect to see an inflation caused monetary collapse, based on your comment that my 2013-2015 time frame is off? The arrival of the inflation storm will not be the end of it, merely the obvious beginning. Something that we do not know is how bad will it get. Your money supply ratio of next year to last year seems a good estimate of this but it might be difficult to pin down these numbers from government "data". They are definitely in the habit of cooking the numbers and are not likely to change that any time soon.



Agreed. This is why we have a bankruptcy court system. It actually works pretty well... when the feds just let it.



My thought was that they should bail out the bank depositors, the annuity holders, and other small investors who have suffered from the idiotic decisions of the big banks, insurance companies, and auto companies and let those companies twist in the wind. THAT would have sent a signal that there is no profit in stupidity, which is desperately needed, IMO. If a company is poorly operated or takes on huge financial risks, why should that be the responsibility of the tax payers?