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geos

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Reply with quote  #1 
Using the last depression (1930s) as a model what gains value & what loses value? Is it better to hold cash or commodities? I really should read up on this. Any recommended reading that does a good analysis? Our fearless war criminal leader is surely leading us down the road to ruin. I saw his last news conference. He can barely put together 2 coherent sentences. My god what an embarrassment that psychopathic corporate whore is.

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foobeca

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Reply with quote  #2 
Quote:
Originally Posted by geos
Using the last depression (1930s) as a model what gains value & what loses value? Is it better to hold cash or commodities? I really should read up on this. Any recommended reading that does a good analysis? Our fearless war criminal leader is surely leading us down the road to ruin. I saw his last news conference. He can barely put together 2 coherent sentences. My god what an embarrassment that psychopathic corporate whore is.


By definintion,  a deflationary depression will cause just about everything to go down except cash.   What I think will happen is that there will be some mild deflation which will slaughter the overextended and overleveraged.  Then there will be a lot of political pressure to bail out the FBs in which case, there will be a reflation which will result in hyperinflation.  Those that survive the downturn will essentially be "given" houses for free. 
doctor

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Reply with quote  #3 
What about the people who hold real money (gold, silver, etc) as opposed to FRNs? Federal Reserve Notes as they are appropriately called.
foobeca

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Reply with quote  #4 
Quote:
Originally Posted by doctor
What about the people who hold real money (gold, silver, etc) as opposed to FRNs? Federal Reserve Notes as they are appropriately called.


There is a monetary, commodity, and jewelry demand for gold.  In a deflationary depression, monetary demand goes down because FRNs increase in purchasing power.  Commodity demand goes down since less stuff is made.  Jewelry demand evaporates.  Then add the risk that the govt. will confiscate it like they did in 1933.  Gold is a loser in a deflationary depression. 
ladyinvestor

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Reply with quote  #5 
  Then add the risk that the govt. will confiscate it like they did in 1933.  Gold is a loser in a deflationary depression. 
 
I was thinking the same thing. You gotta wonder why the constant advice to hurry and buy more gold.
 
I think I will ==REMOVED===
 
Just my 2 cents.
curious1

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Reply with quote  #6 
We will never see a deflationary depression again.  It would be political and economic suicide and it's too easy to prevent, via inflation.
Geoffrey

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Reply with quote  #7 

If you want to buy food during a depression buy silver now, not gold.  As much BS as it was for a government to outlaw the possession of gold in a free society, they have no way of enforcing the possession of silver, it's too common.

 


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hessj

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Reply with quote  #8 

Ya I agree about gold.  I'm not sure in a recession if it will hold a high value.  I pulled my money into a CD to have liquid.  If it gets as bad to where the dollar crashes and price of milk is 100 a gallon then I will just take my guns, cash, and will go into the mountains and live like 1800's.  The dollar collapse can happen if the fed is stupid enough to lower rates to save the RE bubble.  But rates will raise and shouldn’t have been that low for as long.  Once those loans raise and 70% of our economy consumption catches up with us, it will be a very bad thing. In the end we have to produce more and quite consuming as a new model economy.

 

"It's a recession if your neighbor gets laid off; it’s a depression if you get laid off"

 

foobeca

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Reply with quote  #9 
Quote:
Originally Posted by curious1
We will never see a deflationary depression again. It would be political and economic suicide and it's too easy to prevent, via inflation.


But, since FRNs are a debt-based currency it's kinda hard to stop deflation since you must convince borrowers to start borrowing again and convince lenders to start lending again. 
ogden

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Reply with quote  #10 

I'm starting to like these rate increases

 

Although many new investors may get hurt in the end it is better to have a slow down of the real estate markets.  Real estate investing is easy, but it doesn't work so well when there is a heard mentality about buying.  I've mentioned my story about trying to buy multiunits in Austin.  I couldn't because inexperienced investors were overbidding by large amounts.  Many of them also had a hard time closing and properties came back on the markets.

 

For those who stop buying a year ago and are setting on equity, cash, and positive cashflow CD rates over 5.5% don't seem to bad right now. This interest rates won't make you rich, but it is great to receive this and not have to be landlord.  Also during this time of "parking money" this rate isn't too painful. 

 

Higher interest rates may also push people to think less about buying and more about renting.  We need renters those are our life blood for the "buy and hold" crowd.

hessj

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Reply with quote  #11 

ogden,

Ya I'm thinking along same lines.  Better to just park my cash. Way the market "wait and see", if I wanted to gamble I'll go to Vegas.  I'd rather hold for for sure div.

curious1

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Reply with quote  #12 
Quote:
Originally Posted by foobeca
Quote:
Originally Posted by curious1
We will never see a deflationary depression again. It would be political and economic suicide and it's too easy to prevent, via inflation.


But, since FRNs are a debt-based currency it's kinda hard to stop deflation since you must convince borrowers to start borrowing again and convince lenders to start lending again.


Yes except-- Deflation is the event that causes borrowers to stop borrowing, because debts become more expensive during periods of deflation (this was the Great Depression in a nutshell). In order for the economy to function we need borrowers and lenders, new investments and a credit system. Inflation is much more manageable than deflation and doesn't cause people to lose faith in the markets. You can argue that we might someday see inflation leading to hyperinflation leading to deflation (once the currency become worthless). But to think that the Fed will tolerate deflation when one of its few publicly stated goals is to prevent deflation, has no basis in fact or reason.
kaihacker

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Reply with quote  #13 
Pretty interesting thread considering where we are today (I was doing some home work about depressions and was searching the archives).

Anyhow check out this article evaluating where we are in comparison to what makes up a "depression"(according to one definition anyway):

http://www.calculatedriskblog.com/2009/03/what-is-depression.html


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