Inflation or Deflation?

Several months ago, when I saw the massive surge in road building due to govt stimulus, I got fooled into thinking Asia was decoupling. Now after watching them rip up good roads, only to make them perfectly new cemented (something I never seen done in Philippines before, they always patch them up instead), I realized there was mis-allocation of capital. Now some hard data:

http://opinion.inquirer.net/inquireropinion/columns/view/20090629-212899/China-no-longer-learning-East-Asian-lessons

...Most Western commentators focus on the spectacular success of China’s export sector and the emergence of China as the world’s factory. But the greater contributor to Chinese growth is actually domestically funded fixed-investment, which constituted over 50 percent of gross domestic product (GDP) and over 40 percent of growth in 2008. China is way off the charts in this regard. Taiwan, for example, which had an unparalleled growth rate of 8 percent each year over 50 years, never had capital investment spending of more than 30 percent of GDP.

But it is not just the high reliance on fixed-investment that is striking. It is where the capital goes that is all important. China is unusual in that bank loans—drawn from the deposits of its citizens funneled into state-controlled banks—constitute around 80 percent of all investment activity in the country. Even though state-controlled enterprises produce between one quarter and one-third of all output in the country, they receive over 75 percent of the country’s capital, and the figure is rising. The Chinese state sector owns almost two-thirds of all fixed assets in the country. This is the reverse of what occurred in South Korea (as well as in Japan and Taiwan) where the private sector received over three quarters of all capital during the 1960s and 1970s.

Another case in point: a close examination of the shares on the Shanghai Stock Exchange shows that only around 50 of the approximately 1,300 companies are genuinely private. Between 1990 and 2003, less than 7 percent of the initial public offerings on the Shanghai and Shenzhen stock exchanges were from private-sector companies. The Chinese state owns about 50 percent of all the shares of listed companies. When state-controlled entities are included in the calculation, it is likely to be around 70-80 percent of all listed shares.

The massive bias toward the state sector would be acceptable if the 120,000 state-controlled enterprises could learn to innovate and adapt. Unfortunately, except for a handful of centrally managed state-controlled enterprises, this is not the case.

To put the situation in perspective, China’s overall use of capital is twice as inefficient as India’s. World Bank findings indicated that about one-third of recent investments made by the state-controlled sector generated zero or negative returns...

...Despite China’s impressive GDP growth, about 400 million of its people have seen their net incomes stagnate or decline over the past decade. The income of the poorest 10 percent has been declining by 2.4 percent each year since the beginning of this century. Since 2000, absolute poverty has actually increased as has illiteracy.

Not surprisingly then that China’s Gini coefficient, a measurement of income inequality, rose from around 0.25 in the 1980s to around 0.38 in the 1990s. It is now around 0.5, the highest in Asia. In contrast, the Gini coefficients of South Korea and Taiwan from the 1960s to the 1990s hovered around 0.34 and 0.29 even as the economies of these countries were growing rapidly...

http://business.inquirer.net/money/topstories/view/20090628-212855/Exports-to-Japan-down-36

...Philippine exports to Japan, its second biggest market, ... falling by 36.4 percent...

http://opinion.inquirer.net/inquireropinion/letterstotheeditor/view/20090629-212901/Whos-to-blame-for-weak-economy

...manufacturing and trade, which contracted by 6.6 percent and 7.3 percent respectively. Exports sank 18.2 percent, while imports declined 19.2 percent in the first quarter of the year. Agriculture also slid to just 2.1 percent and the services sector showed no growth...

I read else where that FDI (foreign direct investment) is down 83% in Philippines, even remittances from overseas workers shrank from double to single digit % growth. And the following confirms what I have noticed which is an increase in number of people doing maid and street vendor (almost begging) work:

http://business.inquirer.net/money/columns/view/20090628-212866/Needless-debate-on-recession

...The aggregate numbers may look good, but a closer look at the jobs data reveals that the news isn’t all that positive. Of the total new jobs as of the first quarter, the largest groups were in agriculture (408,000 new jobs), wholesale and retail trade (346,000 jobs) and private household employment (139,000 jobs). By worker category, self-employed workers accounted for 609,000 of the new jobs, while unpaid family labor increased by close to 400,000. One can surmise from these data that the new “trade” jobs were probably mostly in the informal sector (i.e., self-employed vendors), while the new agriculture jobs are mainly unpaid family labor...

http://business.inquirer.net/money/topstories/view/20090628-212857/Govt-weighs-options-to-cover-big-deficit

...But officials were forced to increase the deficit ceiling to P250 billion after estimates showed that tax collections could fall short of target. This was the fourth revision from the original budget deficit target of P40 billion...

In the U.S., if the economy suffers a massive further contraction and, we end up with an hyperinflationary monetary event, what happens to housing prices???

Jack, I believe the answer you are seeking is in the value of the dollar and weather it will have the same purchasing power in the "Future".
Housing value, not prices, will decline and as the dollar falls of a cliff so will the power of the dollar to purchase. The price will increasing move higher as the dollar loses value but the value of the house will decrees because of supply and demand.
I see it this way, 2$ today = 1$ tomorrow (hyperinflation), a house worth 1$ today will be worth .50$ tomorrow (Contraction). Supply is getting higher and demand is slowing down.

If you wanted to buy a home today and make a quick turnover Go For It but do it quickly because tomorrow you're money will be worth less. To me this is playing with fire right now considering what is taking place in the US with California and now talk of NY defaulting and the Gov saying no to help them because the gov doesn't need to take over the government they want to take over the privet entities.

Think of what Alan Greenspan said, "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."
So with hyperinflation knocking at the door, well... No home is a safe store of value.

jack wrote:In the U.S., if the economy suffers a massive further contraction and, we end up with an hyperinflationary monetary event, what happens to housing prices???

Answer! Lower in the city and higher in the country in the short term, 3 to 6 months. Long term the value of a home will be the last thing on your mind.

"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." Lord John Maynard Keynes (1883-1946), renowned British economist."

I would like to change the above to read "and does it in a manner which only one man in a million is able to diagnose." and these people are screeeming at the city gates that we are headed into hyper-drive and one of them is Shelby screeeming in this forum.

thank you Rob for your response.

I am trying to decide if i should sell my house and get rid of the mortgage to buy in at deppressed levels in a few years. Or, hold the mortgage and pay it with inflated currency later.

Hi Jack,
Are you really looking to sell you're home? I know I would hate to sell mine. But, I look to the Lord in everything and He has guided me in a direction that is ... Peaceful.
Look,I have a home that is 2/3 paid off I don't have a job and I owe back taxes. I have every reason in the book to sell my home but I won't. Why? Because He has a much better plan for me: )us). Homes in the area I live sell on the same day they go up for sale but that can change in a heartbeat. I know that. He has never guided me in the wrong direction. Never!

When I look at what you are saying: "I am trying to decide if i should sell my house and get rid of the mortgage to buy in at deppressed levels in a few years."
When I read this the only thing that comes to mind is Buy low, Sell high. If you sell you're house now you still need to pay for lodging right? And for how many years? This money can be put on the mortgage instead of giving it to the landlord. Are you selling the house "High" or is the market depressed to near bottom were you are? If the market is a buyers market in your neighborhood then you know it's not time to sell.


Next; "Or, hold the mortgage and pay it with inflated currency later."
I truly believe that you should "hold" and pay off you're mortgage with the silver investments later. You will have a much better outcome. This is what the Lord has shown me, take what savings I have and invest into silver mine in Canada. And this is what I have done. When inflation goes up, my dollars will be worth less but because silver is going to increase in value so will the number of dollars invested. I would never be able to pay off my mortgage with just having money in the bank or in savings. We need to be invested in hard assets like gold or silver. This will off set inflation in the short to mid term. After that God has guided me in a completely different area.

hey Jack... Did you read JH's email on "Housing's Still Overvalued & Silver's Still Cheap"?

J.H. "If we are fortunate, housing prices will drop 50-75% in 4-8 years, and it will be over quickly. That is unlikely, and would require the election of somebody like Ron Paul as President."

I think Jason failed to mention his home is not for sale because he has no mortgage. If you have a mortgage and you foresee the value of your house heading below what you owe on your mortgage, then you should want to sell especially if what Jason is saying about housing dropping 50% to 70% in 4-8 years. But and I say BUT, if you look at what is going in the world today and you have done your homework you will see that silver (and gold) is nearing its end of being suppressed. The TPTB will not have enough money to continue holding down the the markets much longer. The time is at hand! Be prepared! Because YOU are the head of the household and it is your job to steer you're family in the right direction. Make wise your dissensions and keep focus on your goal.

It depends on your situation and plans.

You have to work out the numbers in your case. I don't think TPTB will allow you to win in hyperinflation. If you can get out of house in the black, and if you alternative living place (e.g. Philippines) will cost less than your mortgage, then I would sell. I would have sold in 2006, which is what I was screaming at everyone to do.

Otherwise, if you can take out a larger loan on your equity and basically live in your house for free by planning to walk away from the mortgage at some point and let your credit go up in smoke, then use the capital to invest wisely, then I would consider that. But you really have to be a wise investor and you need to be willing to walk away from USA and credit in future.

But for many people, they have no better option than to go down with the Titanic. They can't extract themselves and their family.

Note I didn't describe all the possible scenarios (i.e. those with no mortgage, etc). As I say, it depends on your situation and plans.

I agree with most of this:

http://silverstockreport.com/2009/housing.html

Thanks for sharing your logic. I will reply interleaved to give my reaction to your logic in parts...

> Shelby,
>
> I was thinking of this back and forth exchange with you this morning. I want
> to try a
> different tactic.
>
> I believe I take it on faith that the US empire's days are numbered.


Agreed, but remember didn't Rome hold on for 100s of years beyond it's peak?

When would you say England's empire peaked? We could say it finally collapsed in early 1900s?

Then again, the USA fiat/derivatives bubble is probably
orders-of-magnitude more extreme and faster, due to the innovations of IT.


> Collapse within
> 1 year would be ideal.


This would be the scenario where the world runs to gold as money (billion of independent, untraceble actors in the economy), trade is fairly revalued (which would wreck havok on China's internal order and power structure), which is what everyone is avoiding.


> Within 5 years would be pretty bad.


This seems more likely, with chaos asserting itself forcefully to break up the existing order, due to the resistance of China and all the power players to allow entropy (freedom of billions of independent actors) to proceed.


> Within 30 years
> would
> be intolerable.


If the power players can hold the current order to that extreme, the blowback is going to be almost unimagineably violent (discontinuous reversion function).



> I mean, so bad that I don't know if I could go on living.
> I
> don't
> believe there is any place better on earth to run to, as the original americans did to
> escape europe. Earth is all used up.


I agree in terms of a new nation-state (a new socialistic attempt at better order), but the individual still has many places to run to. Actually Jesus mentions this in Matthew, he says the true believers will not have run through every city before he returns.

The Bible teaches the true believers to come out of the Great Harlot system.

I think where we end up is precisely as predicted in Revelations, where the only salvation is an individual one with God. In Matthew 6:5, Jesus explains we should not pray in church like "babbling pagans", but rather secretly in our room. You can ignore my references to Bible, as I am only noting how it coincides with our logic. I am not letting it lead my logic.


> I see the US empire as a giant gun,
> and
> at
> least inside the US the gun is pointed away. The US quality of life is sustained on
> the backs of the rest of the world. Do I want to raise a family in the "rest
> of the world"
> where people are held down by corrupt governments bought off by the US?


I do not believe that if you take away that imbalanced paradigm, that you will suddenly have a new more just(ice) order. The only way you get individual freedom, is to avoid the concentrations of power that come from socialistic order (government). The Bible also speaks about this where it is said that we should not seek to have a man-made government (earthly King), but if we want one he will take everything from us and enslave us.

You see the current gun is advantageous to the people at the top in both USA and in "rest of world". You take away that order, those people will scramble to find a new order that maintains their power. The reason they got that power in the first place, will still exist, which is human nature to use debt (an individual enslavement action, with collective enslavement results), and to take from the group and redistribute it (government, or group enslavement action).





>
> I believe people turn to religion as a defense mechanism to get through a miserable
> life.


Is life that miserable? The Great Harlot has very little effect on my daily life, when I choose to go outside of it's tentacles.

I think most people turn to the easiest things to numb their mind (like TV, overeating, etc), but there are still places to go to at one with nature and outside the monotony of Great Harlot system.


> I don't have that option. I can't believe in god or an afterlife. So I
> have to find
> some other belief to sustain me.


How about what I wrote above? Could the diversity of nature (non-monotony of Great Harlot, i.e. man-made, system) be an inspiration? It is for me. For example, I most often feel at ease and interested in places where people are not all programmed by TV.


> I think the knowledge that the corruption
> will end
> shortly allows me to go on day to day.


I would prefer to suggest or offer the you not rely on a man-made
socialistic result to save you (give you inspiration), and rather on your own individual (maybe include your family and close friends) relationship with the diversity of nature. I think that is what Jesus is referring to (nature is God), but if you prefer different semantics to coincide more with a purely "scientific view" (non-cartoon characters, as you view "God", "Jesus", "John the Babtist", etc), perhaps it is just a different road to a similar paradigm of coming out of the man-made system?

>
> When you say it won't end for another 30 years, I have to reject that immediately.


Well I am sure the man-made results won't end for another 30 years. Can the nation-state system achieve an order that makes you feel justice has been served? It is interesting to me that TPTB seem to be aware of the need to present an image in the media of injustice and how their global order will return justice to mankind by eliminating the corrupt
nation-state paradigm (the imbalanced one with the big gun you describe). But this apparent (media illusion) new justice will be the lie of the anti-christ. This will be the one that will have zombies walking to take the glorious 666 enslavement. People will not even realize.

But you know from science that increasing concentration of power and order can never be justice or freedom. So I do hope you find a semantics that allows you to avoid the media programming and come out of the Great Harlot.

I say that with love of you and men.


> Because I see that as business as usual for the rest of my life, no end in sight.


You are yearning for the great release of energy from the chaos of diversity of nature. You see how much progress is being impeded by the current man-made paradigm of governance (resource allocation and
programming of minds via media, i.e. the Great Harlot system in my semantics).

You are yearning for the return of Jesus after the masses have destroyed themselves, but you have a different semantics.

But I think we can go directly to that place now. We are given the means.
We can work towards coming out that system. Is that totally impractical? Well it seems a lot depends on how much baggage we require to hang on to
no? I am living example of trying to figure out if I can come out of it. It is a constant struggle for me to figure out if I can release all this baggage that I have accumulated since birth.

Remember when Jesus's mother and brother came to visit him, he said "all you masses are my brother and mother". The model of Jesus (whether he was real or not in your view), is one of no earthly baggage.


>
> I don't know what the future holds. I can't! How can anyone? I at least have
> some
> insight as to what biases I have.
>
> Can you share what biases you have? I keep asserting that you want the outcome
> to be "total worldwide collapse in 30 years". Is this accurate?


No. Great psychological profile question (direct to key point).

My bias is I want to be free and fulfilled. I have stated this before as wanting to know "the truth", or wanting to understand my role in this universe.

My bias in terms of outcomes is I do not want to see the progress of the "new world order" to outpace my learning rate. Right now I still need resources (baggage), because I am still learning how and whether I can come out of this Great Harlot (new world order) that is developing.

My bias is I do not expect the new world order to be justice (although it may appear to be, maybe as compared to coming after some tumultuous period), but rather I think it will be the zombie system of the USA catching up with where I am, removing my current safe haven. I will have had to move on before then. So 1 year would be way too fast. I would not be able to learn and adjust that fast. I have still too much baggage to sort out.

So is my bias fear or is it a desire to be free of a system?


>
> In the midst of all this, nagging in the back of my mind is machine intelligence.
> Or any one of several other big technological advances which would be game changing. But humanity isn't pursuing the right ones with the right intensity. Moreover
> the patent and civil court systems are used to suppress new technologies.


Rather than debate the specifics (technology), I see now more broadly that you want the same explosion of freedom that I want.

TPTB are managing humanity's innate desire for freedom, by offering media illusions (mind programming), addictions, etc..

How do we battle their system? I think the only way is an individual release from it. A socialistic battle serves their end (always has in numerous prior examples).


>
> I think the concept of demanding justice is a big problem as regards the retiring baby-boomers. They have expectations of being on the receiving end of a deal. They paid into social security and invested in 401K's and the stock market, bonds, etc. Specifically for their comfortable retirement.
> They are a powerful voting block. Now from their perspective anything that threatens their planned retirement is evil and unfair.


Agree very strongly for probably at least 50% of the population of the boomers. I don't have a firm grasp on the exact demographics. Seems that those who read someone like Jason Hommel are in the very small minority.


> I don't
> believe
> the
> world is wealthy enough to allow for all the baby boomers, who didn't have enough children, to go gently into that good night.


Agreed. The world could be wealthy enough in some sense, if gold were allowed to be money and the system would be allowed to anneal (billions of individual winners and losers), that there could be winners and prosperity for many people (not the spoiled ones as you allude to).

Instead the world is trying to force everyone to share the load of carrying the boomers, which has the potential of dragging everyone down, which is why I say it can only end in war.

It depends on how long the current power players in the system can hold gold (& silver) down, and keep the chaos from feeding into the money that people use every day or stores of value. So far, they are amazingly successful, considering how little investment it would take to throw the silver market into chaos. It is amazing how little people in the world know or care to try to stop this problem before it gets intolerable and headed for war. This gives the Bible more credibility for me. It explains how that the people will be fooled.


> In order to
> finance
> their retirement wealth from the world must continue to be sucked away. The baby boomers demand justice -- for them. But it is injustice for the rest of the world.


Agreed.


>
> I compare this to eskimo culture. When the old people become useless and would be a burden on the young ones, they say goodbye and go walk out on the ice and freeze to death. The modern philosophy of not wanting old people to die, wanting to equalize society to handicapped and crippled people, so that the benefits of natural health and
> intelligence
> and youth are erased -- is this justice? Burdening the strong for the sole purpose of keeping the weak around -- is this justice? Yet this is what soceity is teaching everyone. I don't think long term this is sustainable, at least if human labor is the source of the labor.


Well I think there is no problem with letting some people do that, as long as the monetary system does not allow them to charge the cost to others. Let each family decide their priorities and then (billions of independent actors) nature will anneal the balance. There will be a diversity, not absolute one way (eskimo) or other (european socialized health care).




>
> I want anarchy. I want freedom from any group, freedom from the majority.


Strongly ditto for me. But also pure anarchy would cause me some severe problems also. I am not ready for 100% anarchy, just some increasing diversity at a pace I can tolerate.


> It used to be that the 50 states were different.


Yes! I remember that. I was from New Orleans. I remember when Mardi Gras was not a tourist event, but a real cultural expression. Now it is just "show me your tits" monotony with no spontaneous dance/jazz
expression.


> Now with an oppressive
> and all encompassing federal government, choosing among the states is essentially irrelevant. The War On Drugs is everywhere. Perhaps if you're lucky you get to smoke marijuana without too much fear of getting harassed.


I have been told that the bankers are behind the drug production and trafficing, and then they use the War on Drugs to create premium prices for their products, and to maintain their monopoly on the drug trade (they can intercept the others who want to compete).


>
> Moreover the US government has now become world wide. As such most countries are a lot like the US in terms of personal freedom -- or lack thereof.


Philippines was recently named by the G20, as one of 3 countries in world not cooperating on bank non-secrecy. So there are still a few places that are not all the way there, but agreed the bankers (and their counter party caucasian socialist machine and zombie population) are gaining more and more control. It is called "globalization".


> If the federal government collapses in hyperinflation, you get 50 states each
> an independent microcosm. One of those 50 will be attractive to live in, in
> terms of low taxes and high personal freedom.


I think we will get some of this anarchy (chaos), but I think the 50+% of the masses will win and get a socialistic order and a dead nation, like Europe. They will win, because the billions of the world will continue to support them. This will be because the billions will not spontaneously start using silver as money. Jason explains how the bottom will not come until the govt/FED sells real estate:

http://silverstockreport.com/2009/housing.html

It may take a war and we may get a period of extreme chaos and
disintegration. It is going to be very interesting to watch how the TPTB plan to manage this transistion to new world order-- one that they still control.

> In the midst of all this, nagging in the back of my mind is machine intelligence.
> Or any one of several other big technological advances which would be game changing. But humanity isn't pursuing the right ones with the right intensity. Moreover
> the patent and civil court systems are used to suppress new technologies.
...
> If the federal government collapses in hyperinflation, you get 50 states each
> an independent microcosm. One of those 50 will be attractive to live in, in
> terms of low taxes and high personal freedom.

Dash?

Reminds me of some of the great discussions from when the JH forum was more active.

I'm not sure what it is, but there is something keeping people from comparing their role in nature with the way other forms and levels of life interact with nature. We think we're different or special. This blinds us from reality. No one can (for long) escape the influence of the world any more than a cell can escape the influence of the body. (Hermits, and cells in petri dishes, excepted.)

... Financial Sense Online just published my article on money stability:

http://www.financialsense.com/fsu/editorials/zweig/2009/0709.html

I began that article here, and Shelby's comments helped motivate me to complete the article.

What I finally figured out is that a net worth tax is the only type of tax that does not cause a redistribution of wealth. After paying the tax, each taxpayer's buying power remains the same relative to each other taxpayer's buying power. That is because the buying power of each taxpayer gets clipped by the same percentage.

It is government spending (as well as taxes other than those based on net worth) that cause redistribution of wealth. And, as we know, the government can find a way to spend money even if it doesn't collect taxes.

I agree with Shelby that we may not be able to trust any government, even one that has adopted a stable system, and should not have to declare our assets. I'm just trying to put some ideas out there that at least are preferable to the unworkable system we have now.

Great job on getting published.

There is nothing we can do now on a group basis, as Total US debt now 500% of national income:

http://mwhodges.home.att.net/nat-debt/debt-nat.htm

Must read:

http://www.gold-eagle.com/editorials_08/saville072109.html

Interestingly I had posted else where (with link for proof) that in China 70% of the private savings ends up in Communist Party public companies, which are 1/3 as efficient in creating new production per capital, than the public sector. I had also noted how Philippines was doing massive govt stimulus, ripping out functional roads to replace them unnecessary brand new concrete and bridges to no where, etc.. Obviously Obama is doing the same thing, on a huge scale with new socialized programs.

So it seems possible that we are headed for a Great Depression worldwide, not an inflationary one. We will get bouts of deflation and inflation, with the constant result of a redistribution of wealth from production to waste. This will drive most private wealth bankrupt and into the hands of the elite.

This does not seem to bode well for a sustained increase in price of silver nor gold, because this will drive the public towards the safety net of the govt and their fiat wealth redistribution machine. The public then never wakes in droves and jumps to gold and silver in masse, thus the precious metals remain marginalized in utility for use as money.

The wildcard is that some millions of people in USA are not totally asleep and will fight back. This is evident by massive increase in gun ownership. This chaos can drive unknown monetary effects down the line. The Japanese man was highly compliant, just keep him drunk with women after work and send his paycheck to the wife at home.

Also the Chinese seem much less compliant than the Japanese. Someone who teaches over there, told me there are 60,000 riots per year. The Communist Party was forced to open the economy some. And I think they will be forced to allow the Yuan to strengthen and give their people more access to imported goods and international travel. This major monetary shift could have unknown implications for dollar and precious metals.


======
ADD: however if we assume that M0 (monetary base) will actually all be liquidified eventually (Saville's TMS would go ballastic), then as in the past this would signal a $15,000 gold price:

http://arabianmoney.net/2009/07/12/gold-should-reach-15000-an-ounce-says-rich-dad/
http://www.marketskeptics.com/2009/03/fed-is-planning-15-fold-increase-in-us.html
http://www.conspiracyoftherich.com

This would mean the people woke and decided to not be debt slaves, and thus hyperinflation event:

http://goldwetrust.up-with.com/economics-f4/peak-oil-nonsense-t102.htm#1651

For as long as people do not move to gold & silver in droves, then we will have the Japanese experience of oscillating inflation and deflation, with monetary base being sucked into debt repayment and increased savings, while the govt borrows and spends production into waste. This will last until the people run to gold & silver, then we get hyperinflation. The USA won't confiscate gold & silver until "they" (or world) are ready to kill the dollar (when the people of world move too much to gold & silver). See the video linked above for why.

SRSrocco wrote:...Let me QUALIFY what I said. I agree with what JIM WILLIE and TY ANDROS said on their latest interview:

DEFLATION will hit those things you OWN

INFLATION will hit those things you USE.

JIM WILLIE and TY ANDROS interview at the link below. When you go to the link go down the page to the line that says PRETEND and EXTEND TACTICS and click on that interview.

http://www.contraryinvestorscafe.com....php?pid=62242 ...

Agreed. Kudos, very succinct.

Look at another way: Deflation of value of liability "assets" (but mortgage debt is not extinguished), with Inflation of Expenses

SRSrocco wrote:...REAL ESTATE, CARS, COMMERCIAL REAL ESTATE, PAPER ASSETS, CD's 401K's, PENSION PLANS, BOATS, ETC and ETC...are the things we OWN will DEFLATE. FOOD, ENERGY, FUEL, METALS, COMMODITIES, WATER and ETC are things that we USE....they will INFLATE.

Of course, we use a HOME, but that is not what is being said. You don't own a GALLON of GAS, you use it. Now if a person wanted to be a BONEHEAD and say that they keep FUEL around for an EMERGENCY, this is still not OWNING IT....it's holding onto it to USE at a future date...

...GOLD and SILVER are the only means to EXTINGUISH DEBT. You can't use another CURRENCY, or MORE DERIVATIVES. This only increases DEBT...

Agreed. This is why Robert Kiyosaki (Rich Dad, Poor Dad) says we should obtain cash flowing assets, not capital gains investments (which are actually liabilities!):

http://www.conspiracyoftherich.com

Eventually gold & silver must be used to extinquish the debt, which will lead to general hyperinflation. This can only occur when the masses run from debt money to gold & silver. Until then, the central banks & corrupt govts can keep us in cycles of oscillating/conflicting deflation and inflation. See my prior post and links in that prior post for more on that.

Perhaps one good metric on evaluating cash flow investments, is they should cash flow at higher than the average annual appreciation of gold and silver over the past 8 years. So thus I would be looking for the cash flow investments that return at least 20% of capital per year. Otherwise keep excess capital in precious metals, while searching for outstanding cash flow investments. And always keep 10 - 20% in precious metals, to prepare for that eventual hyperinflation event. The best way to invest in commodities is to own them in a cash flowing business, such as an apartment complex in a low-cost country where the materials are the major portion of the capital asset (e.g. Philippines).

The other point Kiyosaki makes, is that taxes will be going up due to all the govt stimulus (waste), and capital gains taxes will be going up very much, whereas cash flow (passive income) can often be earned with 0% tax, if one is wise. For example, some cash flow businesses are done in cash (not reported). Others are structured with tax incentives, etc..

Kiyosaki makes the obvious point that to target cash flow where people are moving to, not move away from. So for example in Philippines, the population is moving from mountains to the city, but the foreigners are moving from the city to the mountains (for the climate advantages).