# Hyperinflation or just plain old inflation



## stack em up (Mar 7, 2013)

With the first coronavirus checks everyone got, as well as CFAP 1 and 2, and now talk of another 2 trillion dollar stimulus, where will all this lead us? I’ve heard a bit of talk that all this spending will lead to inflation or it’s ugly sister hyperinflation . It makes sense to me. The question I have is how long before we see the interest rates climb? I was born in ‘82 so I remember the 80s farm crisis from the eyes of a little kid. Didn’t have money for this or for that but we always made do. Dad can’t recall when the interest rates started climbing but he remembers paying 20% on the operating note. I’m doing everything I can to keep as many pennies as I can in my pocket. Just looking for others thoughts.


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## Gearclash (Nov 25, 2010)

I know I have been wondering the same thing about inflation. I think the key to whether or not we see inflation and how much is going to depend on money velocity. If money is not moving around quickly in the economy, it is kind of the same as having less money in the economy. I think the reason that the government dumped such a massive amount of money into the economy this year is that they foresaw a drastic drop in money velocity, for a wide variety of reasons.

I would define hyperinflation as being a loss of confidence in a currency; in other words, the currency is not so much being devalued by an excessive supply as that nobody wants to own the currency any more. So long as the US is a stable country I don't see that happening. How long that can last I don't know.

Regarding interest rates, who knows? My thought is that we are not very likely to see the high rates that occurred in the 80s. I think our economy has gotten too used to low cost loans to function at a higher interest rate.

_________

Just a couple thoughts I have about money and monetary policy.

1) A successful business requires capital (money) and entrepreneurial ability. Lack of either will eventually be fatal to the business. My thought is the economy will be most vibrant when those to needs are as closely matched as possible.

2) The money supply required for an economy to function as time progresses can be compared (poorly) to an internal combustion engine. Money is like the oil in an engine. It is not the source of power output per se, but is vital to maintaining power output. Too much in the crankcase is harmful, as is too little. A normal economy is like an engine that adds cylinders every year. It is therefore necessary to add oil capacity to that engine to avoid problems due to lack of oil.


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## r82230 (Mar 1, 2016)

Couple of things have happened since the Peanut Farmer's era. Up until then the Fed (Federal Reserve) didn't fine tune the money supply. Better known as the M1 and M2 (measures of money in circulation and in banks). Think off a faucet of hot and cold water. They only turned one on or off wide open at a time, so you either ended up with too hot or too cold water. Now, they slowly adjust both faucets (interest rates/printing money) to try to keep the temperature the same or slowly change the tempature.

The US economy GDP (Gross Domestic Product), is around 2/3 spent on services (we are 'consumers' mostly). The stimulus package was to spur the spending (which it seems to have did). Problem was, there were a lot of services closed or reduced in capacity (restaurants, travel, hotels, etc.). I know in my case, I use to take the better half out to eat at a non-fast food restaurant 3-5 times a week, or more. Not that I needed to, but just did. Now, since early March, I been out to a sit down restaurant once (last weekend). I also know our grocery bill is higher.

I think I read somewhere about 40% of consumer spending from hotels, restaurants, travel, etc. was re-directed to TVs, home appliances, home improvements. Which in turn helped create a 'shortage' in those sectors. I just can't put my hands on that source of info right now.

Here's an interesting chart in this article about where the stimulus money was spent by income brackets.

https://www.economist.com/graphic-detail/2020/09/02/how-did-americans-use-their-coronavirus-stimulus-cheques

Too much was 'saved' or used to pay down debt. Remember the government wanted it spent, we are consumers after all. As Gear mentioned money velocity is important.

As far as interest rates, who has a crystal ball? We gone through more than a decade of low interest rates that has never happened before, so it's hard to gauge using history. I personally am in the process of refinancing, locking in interest rates for 10 years. Sooner or later interest rates will go up (they can't get much lower than 0% that the Fed is flirting with today IMHO).

Unfortunately, I also had the fine opportunity to experience of double digit interest rates in the early 80's under my belt as an 'experience', that I have not forgotten. First home mortgage was at 11.5%, farm operating loan was a variable (never again experience too  ), started at 8.5%, got up to 13.5%. 

Larry


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## r82230 (Mar 1, 2016)

Stack,

The attached are a couple of things that came across my desk, thought I upload for your reading pleasure.

Larry


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## rjmoses (Apr 4, 2010)

Inflation ran rampant when Nixon floated the dollar.

Expect inflation to run rampant anytime soon because that cures the Social Security deficit and government debt problems. If appropriate, borrow money now, pay it back with ultra cheap dollars.

Ralph


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## Ray 54 (Aug 2, 2014)

Just don't sell the farm and think you can live 10 to 20 years on the nest egg you just put away. Of course you could have the crystal ball that will show the ins and outs of the stock market.  But I would not bet on it.


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## rjmoses (Apr 4, 2010)

IMO, the best "investment" for hyper-inflation would be land.

Just thinking.....

Ralph


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## r82230 (Mar 1, 2016)

rjmoses said:


> IMO, the best "investment" for hyper-inflation would be land.
> 
> Just thinking.....
> 
> Ralph


The biggest obstacle with land IMHO, is the darn yearly property taxes (what I call rent to the government). You have to pay whether you sell property for a gain or not. Well I guess you could not pay them and just loose the property later. :huh: And we won't talk about the cost of insurance (you could go naked on this, I suppose).

Larry


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## Gearclash (Nov 25, 2010)

rjmoses said:


> IMO, the best "investment" for hyper-inflation would be land.
> 
> Just thinking.....
> 
> Ralph


Ask Nebraskan farmland owners how that is working out . . .


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## r82230 (Mar 1, 2016)

Gearclash said:


> Ask Nebraskan farmland owners how that is working out . . .


That's one of the areas i was thinking of, seems Lincoln & Omaha got the farm land owners (farmers) by the throat. Will be choking the 'cash cow' to death even. Looks like Chicago might not be far behind. 

Larry


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## Gearclash (Nov 25, 2010)

Nebraska has a unicameral legislature so there is no Senate to help even out the rural lack of representation.


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## stack em up (Mar 7, 2013)

So what's the deal with Nebraska farmland? Haven't spent much time reading anything other than soil sample reports and watching the futures markets.

Read somewhere just today that market analysts see the dollar dropping as much as 20% in the next year. That's great for commodities in my opinion. Oil futures being sub-zero due to the little tiff OPEC and Russia are having, should be a great year for farming. Famous last words I know.


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## Gearclash (Nov 25, 2010)

stack em up said:


> *So what's the deal with Nebraska farmland? Haven't spent much time reading anything other than soil sample reports and watching the futures markets.*
> 
> Read somewhere just today that market analysts see the dollar dropping as much as 20% in the next year. That's great for commodities in my opinion. Oil futures being sub-zero due to the little tiff OPEC and Russia are having, should be a great year for farming. Famous last words I know.


Real estate taxes are so high that in some places the amount of tax paid per acre is very near what the land rents out for.


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## JD3430 (Jan 1, 2012)

I have been a firm believer in owning gold as part of both my investments and retirement. My parents were depression survivors and big into owning gold. 
The rumblings I'm hearing about the "digitization of the dollar" has me pretty concerned as I have set aside cash to fund college. It kind of reminds me of the 1934 government buyback of gold. 
Is the government planning on "buying" all our paper cash and converting it to digital currency? 
How much wealth will be lost by the average American?


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## rjmoses (Apr 4, 2010)

I'm trying to think of ways to prepare for the future. E.g., I'm seeing equipment and parts shortages at the JD and NH dealers, JD isn't expecting any new tractors until June at the earliest. NH is having trouble getting parts for my tractor.

So, I'm asking myself how to prepare for Biden's Dark Winter--which I take to mean things are going to get pretty ugly. And I expect it to get ugly regardless of who gets elected.

I tell people I think we are at war--WW3--but half of the US isn't smart enough or willing to recognize it. It is an information/propaganda war aimed at world domination with fear and safety as the primary weapons.

It doesn't surprise me that ammunition is in short supply since the components, brass, primer's, etc. are made in China.

I was considering trading my oldest tractor in on a new until I found out the model I was interested in was built in Turkey. I don't think that's a good idea.

I'm flip-flopping between hyper-inflation, stagflation, food and energy shortages, etc., My crystal ball shows a storm, but it doesn't say if it's a tornado, hurricane, blizzard, drought, tsunami, or what..

These are a few of my thoughts, but the future doesn't feel too good. So, I'm rethinking my plans, preparing for the worst, but hoping for the best.

Ralph


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## stack em up (Mar 7, 2013)

As far as preparing for the future, I had the diesel barrels filled yesterday, $1.54 for 2000 gallons

Owning gold seems like a pretty good idea as an insurance policy. I get mine from Fat Tony in the back of Italiano Ristorante. Gives me a hell of a deal


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## JD3430 (Jan 1, 2012)

If we look over the 15 years from 2005 to 2020, the price of gold has increased by 330%. Over the same period, the DJIA increased by only 153%.

In terms of preparation, I think we all need to prepare for shocking increases in fuel costs. 
Also might expect that some kind of emissions or carbon taxes to be deployed. Might be added to fuel tax, or a penalty of some kind for older machinery or all machinery in general. Will AG be exempted? Who knows. I'm sure the teachers union will get every break under the sun.


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## stack em up (Mar 7, 2013)

JD3430 said:


> If we look over the 15 years from 2005 to 2020, the price of gold has increased by 330%. [/size]Over the same period, the DJIA increased by only 153%.[/size]
> 
> In terms of preparation, I think we all need to prepare for shocking increases in fuel costs.
> Also might expect that some kind of emissions or carbon taxes to be deployed. Might be added to fuel tax, or a penalty of some kind for older machinery or all machinery in general. Will AG be exempted? Who knows. I'm sure the teachers union will get every break under the sun.


If you're concerned about it, better buy some fuel barrels.


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## Edd in KY (Jul 16, 2009)

I have been doing this financial game for a long long time. I bought my first stocks in the mid 60's, first investment land in 1970. I've been through many cycles up, down and sideways. I have been moderately successful. 
What I have learned is that most people, including the advisors can not see into the future. When gasoline was $4/gallon in 2008, how many of you saw it going to $2/gal 12 years later? When mortgages were 10% who predicted that 3% mortgages would be common 40 years later. Who guessed that the great GE money machine would stumble and tumble? As recent as 4 years ago some politicians predicted that coal would be like gold again..it has just fallen further. Personally, I have a hard time seeing value in a stock that just provides a place for people to share pictures of their pets and food (FB), but it is in most of my mutual funds. My lack of being able to see value in some of these stocks is why i have some mutual funds to let someone else look for value. I can't see how our kids can save for their retirement with interest rates at 2% and college tuition and healthcare going up 8% a year. I have never been one to borrow a lot of money and hope some miracle will save me. I would rather sleep soundly and live less extravagantly.

A good example of not looking into the future is the millions of people that can not even see the trends all around them, as the jobs go away, their community crumbles and their property values fall. You can find that situation in every state.


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## luke strawwalker (Jul 31, 2014)

All I know is, you can't just print money willy nilly and throw it out there indefinitely... at some point the money just becomes totally worthless... It's never worked anywhere it's been tried-- look at Venezuela today, or Brazil in the 70's, or the Weimar Republic in pre-Nazi Germany. It's just a BAD idea...

The purpose of money is to provide a stable medium of exchange between value of work or production of goods and services for other things of value, like resources, goods, or services. When you dump money into the economy trying to "print away your troubles" you simply short-circuit that process or stability for everything else. These "bailouts" and "stimulus" things are bad enough, but then I hear these idgits talking SERIOUSLY about "guaranteed minimum income" where everybody gets a $12,000 a year check from the gubmint and I'm like "SERIOUSLY??" It's like the push for $12/hour wages for patty flippers... h3ll when I drove a school bus I didn't make much more than that, but there was a h3ll of a lot more rigamarole to have to deal with to be a bus driver... and a lot more BS to put up with! There are cops making about $12 bucks an hour-- on a radio show when that was the big rallying cry, one called in to a radio program I was listening to driving home from feeding cows on the other farm 90 miles away... He was like "WHY should I risk getting [email protected] shot off every night for a lousy $12 bucks an hour if I can make that same $12 an hour in a quiet burger joint flipping patties??" The reason "minimum wage" jobs ARE minimum wage is because ANYBODY can do them... it takes effort, skill, talents, education, training, qualifications, testing, etc. to be a cop or a school bus driver, or any of a thousand other careers or jobs... Not just "anybody" can do it. Hence why those jobs MUST pay better than "minimum wage" jobs, otherwise, WHY go through all the expense and rigamarole to do the more complex or dangerous job FOR THE SAME MONEY?? That's what people don't get. SO, minimum wage rises, everything else ends up rising as a result, by necessity, to keep people and get new ones motivated enough to jump through the hoops necessary to do those more complex or dangerous jobs. So, in the end, $12/hr is the new $5/hr...

Same thing with the money supply... when you flood the money supply with worthless scrip, like giving everyone an extra $12,000/yr, which they have done EXACTLY NOTHING to create any value or added production to actually EARN, you simply diminish the VALUE of the money by an equivalent amount-- more worthless dollars chasing the same amount of goods, services, and resources, since nothing of value has been added by the gubmint handing out "Christmas money" to everybody, totally divorced from any actual work or increased value from added production.

Eventually you get to the point where Venezuela is-- the most valuable thing you can own there is TOILET PAPER (sound familiar?) Eventually money gets SO worthless it's cheaper to wipe with $50 bills than actual toilet paper...

We're not there yet, but were certainly on a path that leads there eventually! OL J R


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## JD3430 (Jan 1, 2012)

DS



luke strawwalker said:


> All I know is, you can't just print money willy nilly and throw it out there indefinitely... at some point the money just becomes totally worthless... It's never worked anywhere it's been tried-- look at Venezuela today, or Brazil in the 70's, or the Weimar Republic in pre-Nazi Germany. It's just a BAD idea...
> 
> The purpose of money is to provide a stable medium of exchange between value of work or production of goods and services for other things of value, like resources, goods, or services. When you dump money into the economy trying to "print away your troubles" you simply short-circuit that process or stability for everything else. These "bailouts" and "stimulus" things are bad enough, but then I hear these idgits talking SERIOUSLY about "guaranteed minimum income" where everybody gets a $12,000 a year check from the gubmint and I'm like "SERIOUSLY??" It's like the push for $12/hour wages for patty flippers... h3ll when I drove a school bus I didn't make much more than that, but there was a h3ll of a lot more rigamarole to have to deal with to be a bus driver... and a lot more BS to put up with! There are cops making about $12 bucks an hour-- on a radio show when that was the big rallying cry, one called in to a radio program I was listening to driving home from feeding cows on the other farm 90 miles away... He was like "WHY should I risk getting [email protected] shot off every night for a lousy $12 bucks an hour if I can make that same $12 an hour in a quiet burger joint flipping patties??" The reason "minimum wage" jobs ARE minimum wage is because ANYBODY can do them... it takes effort, skill, talents, education, training, qualifications, testing, etc. to be a cop or a school bus driver, or any of a thousand other careers or jobs... Not just "anybody" can do it. Hence why those jobs MUST pay better than "minimum wage" jobs, otherwise, WHY go through all the expense and rigamarole to do the more complex or dangerous job FOR THE SAME MONEY?? That's what people don't get. SO, minimum wage rises, everything else ends up rising as a result, by necessity, to keep people and get new ones motivated enough to jump through the hoops necessary to do those more complex or dangerous jobs. So, in the end, $12/hr is the new $5/hr...
> 
> ...


And to piggy back on what you just said, I always hear liberal politicians trying to push making minimum wage jobs into a "living wage" as if anyone flipping burgers or stocking shelves intends to do that as a career. 

THOSE JOBS ARE NOT LONG TERM CAREER JOBS!!!!!

We actually need to make those jobs short term jobs for HS and college kids to be lower paying to help keep the cost of food LOW so EVERYONE can afford to EAT. Only a handful of people work in low paying jobs compared to those who need to eat. Everyone has to eat.

We have become so frighteningly stupid as a society. We don't understand basic economics and the fools promoting $15/hr minimum wage will only make things worse for poor people. 
The corruption is out in the open and the Trojan horse is inside the wire. The enemy IS within and they are taking over RAPIDLY. If this nonsense is allowed to continue, you won't recognize this country in 2 years.


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## Edd in KY (Jul 16, 2009)

However, have you considered that the government is actually subsidizing the businesses that pay minimum wage? 
The local McDonalds franchisee is likely the most profitable and wealthiest guy in your town. The Walton (Walmart) family is worth 130 $Billion dollars. And they got wealthy by paying wages so low that we the tax payers subsidized their workers with food stamps, medicaid healthcare, and subsidized section 42 housing. Walmart managers are noted for teaching employees how to apply for government subsidies.

We say business should be profitable to survive and yet we blindly subsidize the work force of these widespread businesses. How about Tennessee, a state that talks about free enterprise, but gave VW $250,000 per job to build a factory there. It is hard for other companies to compete against a company that gets free subsidized workers of 10 years.

The government is quick to pass bills that benefit their major contributors but we seldom hear that side of the story. For example, my state Kentucky, just gave GE Appliance in Louisville $40 million in tax incentives for a factory expansion. GE Appliance is owned by Haier of Qingdao, China, a Communist owned enterprise. So our own American state governments are subsidizing Chinese Communist businesses? Convoluted logic.


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## Ray 54 (Aug 2, 2014)

Welfare is welfare not matter who gets the money if you did not work for it. But then again I had my hand in the cook jar too. I signed up for the government give away to farmers in the covid relief.

We have any pure people that have not got there covid money the government has been throwing around. My thought has been those your competing with to rent pasture take it, so to be competitive I have to as well.


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## JD3430 (Jan 1, 2012)

We gave much of our Covid relief money away to others who were hit hard. My family finances have been relatively safe throughout, so far.


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## r82230 (Mar 1, 2016)

Ray 54 said:


> Welfare is welfare not matter who gets the money if you did not work for it. But then again I had my hand in the cook jar too. I signed up for the government give away to farmers in the covid relief.
> 
> We have any pure people that have not got there covid money the government has been throwing around. My thought has been those your competing with to rent pasture take it, so to be competitive I have to as well.


Here's the link to see what/whom/how much your local folks got from the PPP loan. Everything from local churches, insurance agents, lawyers, doctors & farmers. I could have gotten one (for my investment/financial services business) and wouldn't have had to pay it back.......................................... but dumb me I guess, my pride got in the way.  Thinking my grandkids would have to pay it back someday. 

As far as this search, just put in a zip code or congressional district for local stuff

http://ppprecipients.com/advancedsearch.php

Or use this one for the actual loan amount (search by zip code, I found works best).

https://searchppp.com/

Larry

PS even football players got into the action on PPP

https://www.aol.com/sports/tom-bradys-company-tb12-inc-195220908.html


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