Tuesday, June 23, 2009

Inflation, not deflation

Jesse today, maintaining that inflation can indeed happen...

Our own view is that a serious stagflation with further devaluation of the US dollar as it is replaced as the world's reserve currency is very likely, after a period of slackening demand and high unemployment. A military conflict is also a probable outcome as countries often go to war when they fail at peace.


From my own readings in this area, the people who tended to survive the Weimar stagflation the best were those who:

1. Owned independent supplies of essentials including food and shelter and were reasonably self-sufficient.
2. Had savings in foreign currencies that were backed by gold such as the US dollar and the Swiss Franc
3. Possessed precious metals
4. Belonged to a trade union and/or had essential skills or government position which guaranteed a wage
5. Were invested in foreign equity markets, and even in the domestic German stock market for a time


Anonymous said...

The essential point for the UK is "government position which guaranteed a wage"

Nowadays of course, it also guarantees complete job security and an inflation-proof pension.

This now covers about five million people in the UK.

Which raises the question, what happens when Atlas shrugs? As, faced with such a demand, he must?

Interesting times.

Sackerson said...

Yes, indeedy, Anon.

James Higham said...

US dollar backed by gold? When? Pre-1933?

Sackerson said...

Jesse is comparing to that time, though the gold link, as you know, was not completely broken until 1971.