Wednesday, January 16, 2008

Deflation

BOE Gold SI +0.282 up to 14.133 (0.000033178054673)
BOE Euro SI +85.963 up to 8509.324 (+1.01%)

The more I see the banks write off losses, the more I worry about deflation. The fractional banking system is going to remove a significant amount of money from circulation. While I'm not a financial advisor, I'm going to vote for devaluation over hyperinflation. I'd move to a cash position rather than precious metals.
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1 comments:

refurbsystems said...

What we will get is a surplus of goods and not enough money to purchase the items (I am speaking of avg. Joe Citizen, not wallstreet). Thus items will have to come down in price to get people to buy. Take the auto industry as an example. When sales slow they slash prices to keep from having to cut production. Now extrapolate that to a scenario where they have to cut production, employees and cut prices as well. That is where we are headed just as soon as all those poor souls with maxed out credit hit the ceiling of their credit limits. Problem is that now they cannot just write it off by filing bankruptcy and start the cycle again. Thus the average American in the next decade and beyond will have to lower their standard of living as they pay off their enormous debt, all the while not being able to get any more credit and thus.....too many goods and not enough money. I don't see a crash, just a coming back to earth over the next few years. Since 1980 some type of insanity has overcome America and it is about to get a economic reality check.

As a side issue, many will say that commodities will still go up. Don't think so, as demand wanes so will the prices on commodities. Just look at what happened to oil this week on the possibility of a recession and demand cutback. Price fell almost 10%.

January 17, 2008 2:42 PM

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