Tuesday, May 26, 2020

The case for deflation followed by hyper-inflation

We see the deflation. Demand sagged. The price of fuel followed. At one point the price of oil was below zero.

Customers are not going to the mall, not trying on clothes they really did not need, not buying them.

Customers don't need power lunches or neck-ties or $500 wing-tip shoes. Kids don't need soccer togs or new swim-suits.

The entire pipeline between Big-box, America and China was full. It drained into a market with no customers.

Retailers are screwed. They need cash to make payments. They have inventory. "Make me an offer"

Companies going bankrupt will put assets up at fire-sale prices. Want to buy a car or a Boeing 747? The next six months will be the time.

Hyper-inflation is a harder call.

What happens when you give everybody $1200 a month and a substantial portion of the population is not producing anything? More dollars, fewer goods and services to purchase.

The other factor is the nose-dive in productivity associated with the new protocols.

Big-box, America is no longer open 24/7. And mom decided to stay home to home-school Buffy and Jody.

Politicians can "not print money" as easily as you can "not slap a mosquito that is biting you".

Mrs ERJ and I
Mrs ERJ and I are having on-going discussions about the "best" way to spend stimulous money.

Mrs ERJ has a very tender heart. She knows many families who are barely getting by in the best of times. Her thinking is "We are doing OK. We could give it to KD or KC or MSDS or....."

My thinking is a little bit different. This money was conjured up out of thin air. It is a loan we took out that our grandchildren will have to pay for.

Debt falls into two categories, in my mind.

There is good debt. That is the debt you take on to start a business, buy a house or buy a reliable vehicle so you don't get fired. Those are debts that will presumably increase your wealth and create assets that will last longer than the loan payments.

Then there is the other kind of debt. That is the trip to Aruba you put on the credit card or the game system that your kid "had to have" but will be obsolete in six months.

My thinking is that there are hard-working roofers and furnace men and plumbers and the like who would be happy to take that stimulus money and make our castle cheaper to run and more comfortable for us.


  1. A loan on their productivity... Investing in their inheritance would be decent.
    But realistically, I see America eventually taking a dive on the national debt. Our creditors take a haircut on the T bills etc. At this point it's an unpayable amount. Unless our descendants accept austerity measures for a few decades.

  2. I'm afraid my response may infuriate as I agree almost completely with you. The only difference is even though these northern latitudes bite for solar, some is better than none. A theoretical 1k watts some of the time could make a big difference in ones life.

  3. Invest in metal.
    Small gold thingies.
    Brass copper and lead.

    Invest in infrastructure that will hold value.

    Have liquid currency / trade goods for the upcoming fire sales.

    There will be deals coming, be ready for them.

  4. The dive on debt will not be necessary if there is that much inflation. The banks will puke over the deflation. Closed lobbies at banks and loan officers that do not return phone calls are a lot like a 1930's bank holiday. If I were on a pension I would hone my buying and selling skills.

  5. Wife and I used the last one on home improvements, any more “free” govt. money will be used the same. Our home is our daughters inheritance,

  6. Yes. Deflation first. Then?

    Money printer go whirrrr.


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