O.T. Inflation vs Deflation Gold vs Realestategreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
I have a feeling something negative is going to happen in the world that causes a finanicial collaps. I don't know exactly when but I have a hunch it will be sooner than later. I believe our financial system is a pyramid scheem about to have the bottem fall out. We have built this system on Debt(promises to pay). The Federal Reserve is expanding the Money supply on a larger scale than ever before. I see the stock market values going out of sight. Risky derivatives and leverage at all time highs. I see interest rates moving higher. I see Oil and commodities moving higher. I see the banks taking riskier positions on loan portfolio's. Personal savings rates are at all time lows. To barrow is the norm in this country. I think we have got this system to a point that one false move could take this house of cards down hard.
If there is a financial collaps will it be inflationary, deflationary, or both? Would Gold be a better store of wealth than Realestate? How could we best protect or grow our wealth if SHTF?
-- Gambler (firstname.lastname@example.org), January 18, 2000
While you can wear gold (if nothing else), real estate has a long term usability...you can live on it, farm/garden it, grow trees, have a business based on it, etc. A german proverb (translated) says that "Under everything is the land..." As a long term (especially multi-generational) investment, it is without equal. Yes, gold lasts (doesn't rust away...), but land also lasts. While gold is being mined each year, they aren't making much more land...
-- Mad Monk (email@example.com), January 18, 2000.
Personally,I think to preserve wealth will take two steps. The first step would be to maintain what I already have through little or no debt, and have my home and necessities available to me with little or no future cash outlay, and possibly own gold for it's perpetual worth ( or maintain gold futures or call options positions to benefit from the flood of dollars from the stock market looking for a place to go.) The second step is to use the position created from my first step to purchase real estate that will be available for sale at distressed prices after the collapse. This real estate would be farm land, food processing, etc., basic needs type of property, not offices, car dealers, malls and unnecessities. Remember, your current debt is in a xxx number of dollars no matter what they are worth.
-- wayne (firstname.lastname@example.org), January 18, 2000.
Good question, gambler. If I knew the answers I'd be rich.
Seriously, real estate is a good hedge against moderate inflation and probably has more buyers than gold. But.....gold can be converted easier in a hyperinflation. Real estate seemed to survive in Germany, as the farmers made it through better than the city people.
Deflationary collapse? We should have one, but I don't think the government will allow it. If we have a simple deflationary collapse, it is the day of reckoning for debts. Debt holders are at risk. This includes the entire banking system. Plus, if the government has to default or declare bankruptcy they will have lost all credability.....they can't borrow enough to support their social programs. My guess is that they'll try to inflate their way out of things, so that they can pay yesterday's debts with tomorrow's inflated dollars, and the net result will be an inflationary collapse.
That's not what I want to hear, since I collect fixed pension and social security checks. In hyperinflation these can become worthless in a couple of weeks. On the other hand, my mortgage is also fixed, and can be easily covered with the fixed income payements.
I'm beginning to think the key to surviving hyperinflation is to not have to buy anything. If you can live off what you have, then you've already paid for it and can get things straightened out when it's over.
Like to hear what others think about it,
-- rocky (email@example.com), January 18, 2000.
It is interesting that any number of companies (movie studios, trucking firms, etc.) have found that (after some years) their land holding were worth more than the rest of the business! This has also been true for many farmers...
It is also interesting to note that some land has lost value against inflation over the years... Water and location are two of the major constraints. A third constraint is that of the loss due to legislation (you are now a de facto private wildlife preserve, etc.) or other regulation.
Finally, in the long term, consider that the population of the US is expected to double in the next century...if not sooner. The Federal Government is continuing to lock up lands in wilderness areas, parks, etc. Available land won't double...it will dwindle!
-- Mad Monk (firstname.lastname@example.org), January 18, 2000.
Keep in mind re. real estate that it isn't "the answer"; it might be great but not necessarily. The drought here last summer was so bad a lot of wells were running dry for the first time in 200+ years, and some had no lower aquafers to drill into. It was real bad for folks with livestock...tankers of water had to be brought in. You never know what'll happen to your land....my sister had acreage in the country and one year gypsy moths practicaly destroyed it. The longer I live the more I realize the only security is the Lord. Really pray for guidance.
-- carolyn (email@example.com), January 18, 2000.
I remember very well, that when the last depression hit, my mother had thousands in jewlery. Also two summer homes on a lake in Indiana. When the money was suddenly gone, she pawned the jewlery for a few dollars, if I recall it was $300. When that money was gone, that was that. However, the summer homes in Indiana were paid for. So, there was a roof over everyone's head.
Skipping the details, the "gold" didn't do much or last long, but the land/house remained. Got the point?
-- Richard (Astral-Acres@webtv.net), January 18, 2000.
1929 the fed maintained money after the break in stock prices, Anybody wish to hazard a guess as to whether Al will flood the markets with liquidity should the need arise.
End point, the result may look the same but how we get there is likely to be different.
-- Squid (ItsDark@down.here), January 18, 2000.
Jewelry is a horrible way to 'invest' in metals since the markup over cost of material is anywhere from 1000 to 5000%. There is a difference between buying gold or silver bullion (such as a certified coin from a mint) and wasting your money on jewelry thinking it will be like wearing money.
Land can be taxed right out from under you. You have got to pay the taxes or it will be sold for tax revenue. Right or wrong that is the way it is. Towns and counties base their revenue on land not income taxes.
In an inflation any fixed interest rate debt becomes less and less of a burden (provided that you still have a job to pay the installments). In a deflation debt becomes a noose around your neck.
In an inflation gold and silver will go up but you will end up forfieting 35% of the 'gains' at sale as capital gains. Actually gold and silver in a deflation out perform in terms of buying power increases.
My opinion is we will find ourselves in a hyperinflationary depression pretty soon. Credit markets will collapse and interest rates on the open market will skyrocket. Businesses will close and real estate will stagnate since no one will be credit worthy to get a loan to buy property. Consumer prices will rise hugely. Stocks will collapse and gold will rise to meet the DOW in price (ie DOW 4000 then gold 4000, DOW 2000 then gold 2000). This is called an asset inversion and it has happened many times before.
The net result will be like the 1930's AND the 1970's mixed together. The Fed Gov will be unable to spend us out of this one without throwing gasoline on the fire of the inflationary furnace. It not going to be a pretty sight.
So it seems best that we hold hands as we walk across this very busy freeway together.
-- ..- (firstname.lastname@example.org), January 18, 2000.
Maybe our collective expectation is warped. We talk and think about how to prosper from something as dismal as a depression. If this society (US) were to suffer through a depression there would be rioting in major cities throughout the country. We have gone from privilege to entitlement and the middle and lower classes are no closer to being morally superior than the rich. How do you ratchet down expectations WORLD WIDE? I really am not sure.
Maybe thinking more in terms of surviving is a more realistic thought. Investments are all relative and just like Gold being traded for bread the price you transfer assets changes to your needs (Think Maslow's Hierarchy of Human Needs). You can only think about "investing" if your basic needs are met first.
My gut feeling or instinct is that we are living on borrowed time. A stock market crash or correction after 1929 meant that the rich had to re think vacation plans. Today a crash with the amount of debt would force many to work well past "retirement" or face absolute poverty. A poverty that many Americans think just doesn't exist North of Mexico. It's all tied together whether we want to think about it or not. We cannot afford a market crash and we can't afford to allow the market to go higher. Clinton has no great love for Alan Greenspan but he had no better choice to make an attempt to hold the market together until the next administration.
Then its somebody else's problem. Guess who that somebody else is?
You and I.
-- Squid (ItsDark@down.here), January 19, 2000.