24 March 2011

Uncertainty

The future is uncertain.  I had a nice long chat with my parents, who are quite well prepared for an economic collapse, about money.

My Father and I discussed paying off bills verses having cash on hand.  I wish I had a crystal ball so that I could tell people what will happen, but I don't.  I do know that the historical signs point out what MIGHT happen and what will likely happen, but nothing more certain than that.

So what is likely?  Well the dollar will likely continue to slip in value and it is likely to be replaced as the reserve currency of the world, just like the British Pound before it.  What will replace it?  Twenty years ago I would have said the Yen, but now it looks more likely like the Chinese Yuan.  Could be the Swiss Franc for all I know.

The other big question is, WHEN will something like this happen?  And the answer is this, I don't know.  And there is the flip side, things eventually return to normal.  So I don't believe that things will get so bad in the next two years that people hoard cash in the bank, I think that "stagflation" is more likely.  Back in May of 2008 I predicted that if Obama was elected it would be the Carter years all over again http://randomthoughtsandguns.blogspot.com/2008/05/memorial-day.html and so far I've been right.

Sure wish that he'd been able to deliver on the rainbow farting unicorns instead.  But, Carter didn't destroy this country and life did return to "normal."
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2 comments:

BLAZER PROPHET said...

The problem is that we are too far in debt to get out. Add to that our debt ceiling is getting higher and higher and will soon reach a point where our currency will devalue quickly. When that happens, double digit inflation is a very real possibility. The feds defaulting on leans and bonds another strong possibility. Eventually these things will come as we no longer have anything backing out debt. The situation is beyond critical.

What is needed is a very radical move. As a possible example, a flat tax + 3% national sales tax dedicated to buying down the debt- all in conjunctions with massive Social Security & Medicare reform. But neither political party has the guts to address the problem head on.

March 24, 2011 at 9:09 PM
Graybeard said...

A 3% national sales tax wouldn't even put a dent in the problem. The fed.gov could lose that much and not even notice it. Our debt is 100% of GDP and growing.

There's one of those empirical "laws" (observations that always seem to hold) - Hauser's Law - that no matter what the tax rates are, the tax revenue is always around 20% of GDP. It was that in the 60's when the top tax rate was in nearly 70%, and in the 90s when it was in the 20s. The difference is that the economy is hotter and there's more opportunity for everyone when the tax rates are lower.

No, we are bound for collapse. When the Republicans try to cut 3% off the budget - when we need to cut 50% - the Democrats sound like they're throwing babies in a DR Chipper Shredder. And offer to cut 1/2 of 1% instead.

Of course, you can argue that the economy is in collapse now, just in slow motion. Otherwise, why have all commodities gone up in price?

March 25, 2011 at 4:28 PM

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