Author Topic: Anyone worried about massive deflation of USD?  (Read 6542 times)

Hoosier Daddy

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Anyone worried about massive deflation of USD?
« on: January 25, 2017, 04:30:21 AM »
Hey all,

I was reading about how Trump is going to (try to) end the TPP trade deal and one of the major concerns as I understand it with this deal is it fails to deal with currency manipulation. My understanding of this issue is that other countries get paid in USD for their exports and they do not convert the USD to local currency because doing so would make their goods relatively more expensive and their manufacturing industry less competitive. As I understand some countries like China have tons of USD right now... if this currency manipulation stopped, wouldn't that mean a huge exchange (sell off) of USD and massive deflationary pressure in a short time? Is anyone worried about this? I know a lot of people here swear by the S&P 500 and other similar index funds, which would be hit hard in this environment... I'm currently holding 55% USD intermediate and long term debt in my portfolio to offset.... anyone else?

EDIT: The direction is inflationary, I had my thinking backwards.
« Last Edit: January 25, 2017, 08:22:34 AM by Hoosier Daddy »

arebelspy

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Re: Anyone worried about massive deflation of USD?
« Reply #1 on: January 25, 2017, 06:00:19 AM »
Explain.  How would you expect this deflation to manifest itself?
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Re: Anyone worried about massive deflation of USD?
« Reply #2 on: January 25, 2017, 06:59:14 AM »
China has had a problem with a rising currency for years with huge inflows. To offset that they attempted to so-called sterilize the trade surplus by buying vast amounts of US $ through holding treasuries.

Now they are having the opposite problem, with people now trying to get their money out of China and as a result China have been selling treasuries to try and support the yuan. But the effect is to raise yields on U.S. debt which - combined with the Fed's promise to raise rates is actually pushing up the dollar.

The markets are doing the opposite of what you claim. And your 'strategy ' is the wrong way around too. Should you not be short long term debt and long quality real estate and equities? Inflation is steady but thankfully above zero and the sky is not falling. don't bet against the U.S. economy - that's been a loosing trade since about 1890?


maizeman

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Re: Anyone worried about massive deflation of USD?
« Reply #3 on: January 25, 2017, 07:23:49 AM »
As I understand some countries like China have tons of USD right now... if this currency manipulation stopped, wouldn't that mean a huge exchange (sell off) of USD and massive deflationary pressure in a short time?

No, if a lot of USD currently held in foreign countries returned to circulation in the USA, it'd cause inflation, not deflation.

Quote
I know a lot of people here swear by the S&P 500 and other similar index funds, which would be hit hard in this environment...

In the short term inflation or deflation are both bad for the stock market, but in the long term (what we have to be looking at if hoping to FIRE) the impact of either on stock returns is essentially null. In the case of the companies in the S&P 500, they're even more cushioned against sudden changes in the value of the US dollar because close to half of their earnings come from overseas.

Quote
I'm currently holding 55% USD intermediate and long term debt in my portfolio to offset....

Yes, that's the correct strategy if you knew that sudden and massive deflation was coming. But A) it's really hard to successfully outthink the market B) as explained above, if foreign held USD flowed back into the US it could cause inflation, not deflation, in which case holding lots of long term bonds is a good way to lose your shirt.

Hoosier Daddy

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Re: Anyone worried about massive deflation of USD?
« Reply #4 on: January 25, 2017, 07:41:45 AM »
You're right I was thinking backwards... apologies!

I also noticed consumer debt levels are the lowest I can see in history (my data goes back to 1980)... this to me would signal we are actually at the bottom of the market deleveraging and are primed for stock market growth in the coming years... but at the same time the market is already at an all-time high..

I'm not sure where to put my money. If inflation is on the rise and stock market is primed for credit driven ramp up, I should invest in stocks but the market is already super high, so maybe it will drop? Any speculators out there have a guess as to the direction?


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Re: Anyone worried about massive deflation of USD?
« Reply #5 on: January 25, 2017, 08:12:12 AM »
Any speculators out there have a guess as to the direction?

It will go up, then down, then up, then down, and so on and so forth.  When and how much?  Well, I will have to consult my astrologist and get back to you.

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Re: Anyone worried about massive deflation of USD?
« Reply #6 on: January 25, 2017, 09:40:15 AM »
I've been told to worry about something in investing for as long as I can remember--from Y2K to Greece to the US fiscal cliff.  It all turned out to be the rantings of crazy people.  Stay away from doomer sites and articles and you'll be peachy.

arebelspy

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Re: Anyone worried about massive deflation of USD?
« Reply #7 on: January 25, 2017, 02:00:11 PM »
I've been told to worry about something in investing for as long as I can remember--from Y2K to Greece to the US fiscal cliff.  It all turned out to be the rantings of crazy people.  Stay away from doomer sites and articles and you'll be peachy.

I lol'd.
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NP

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Re: Anyone worried about massive deflation of USD?
« Reply #8 on: January 25, 2017, 03:05:49 PM »
Deflation of the USD could happen at any time but, as it's been pointed out above, not for the reasons mentioned in the opening post. Inflation could accelerate just as easily. I don't think anybody knows what will happen.

The U.S. stock market certainly doesn't seem cheap right now, but it could climb much higher so it's impossible to tell if this is a bad time to enter the market.

International diversification helps alleviate all of these concerns. International stock markets seem cheaper than the U.S. market, so if one has a big stake in both, the risks of possibly high U.S. valuations are reduced. Same with the currency: If the USD goes up, I can benefit by buying even cheaper international stocks, and if the USD goes down, I will benefit as my significant international holdings increase in value. Does it mean I'll come out ahead in the short term no matter what? No, but it allows me not to worry a lot about these things.

Mother Fussbudget

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Re: Anyone worried about massive deflation of USD?
« Reply #9 on: January 25, 2017, 03:48:02 PM »
I've been told to worry about something in investing for as long as I can remember--from Y2K to Greece to the US fiscal cliff.  It all turned out to be the rantings of crazy people.  Stay away from doomer sites and articles and you'll be peachy.

Some investment types call this the "wall of worry" that bull markets invariably climb toward ever new market highs.

Perhaps off topic... please let me know...
I am not too worried about inflation.  However, I *AM* worried about how current policy decisions could affect the average non-1%-investor down-the-road in 2017-2018, and I foresee possible macro-economic problems with these policies.

In past administrations of the sort we have in office today, when tax cuts, plus budget cuts (i.e. austerity), along with de-regulation, have been adopted as policy, these policies have a tendency to lead to a recessionary cycle.  The people at the top of the economic food chain don't tend to feel the effects, but everyone below the top 10% feel the changes acutely.  I'm not sure if it's because there's less discretionary spending available, or not.  Perhaps it's because the general population is made up on 'consumer suckers'.  I'm concerned this will come to a head with the debt ceiling discussion.  Maybe not on March 15, 2017 when the next debt-ceiling limit rise comes up. (although it *IS* one of the first legislative deadlines Congress faces is the need to raise the debt limit. The budget deal brokered last November suspended it until March 15, 2017).

Fortunately, the Trump transition team signaled a willingness to extend (punt) the debt ceiling deadline until later in the year, but the new Congress and President will need to address the debt ceiling issue at some point in 2017.  The next time the debt ceiling discussion comes up, you can expect to see proposed deep budget cuts, and with the GOP in control of all 3 branches of the US government, they'll get what they ask for.  We won't know right away whether those changes will be positive for the overall economy.  THAT is what *I* was thinking last night, and why I lost sleep.

Steering the 'Ship Of The Economic State' is like navigating a huge super-tanker (Nixon's words). When slight course corrections are made, the ship changes course, but you often can't discern the change immediately.  Over time, you can see the ship is moving in a different direction. By that point, you hope the ship is moving in the direction you intended. 

chesebert

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Re: Anyone worried about massive deflation of USD?
« Reply #10 on: January 25, 2017, 03:57:31 PM »
Deflation of the USD could happen at any time but, as it's been pointed out above, not for the reasons mentioned in the opening post. Inflation could accelerate just as easily. I don't think anybody knows what will happen.

The U.S. stock market certainly doesn't seem cheap right now, but it could climb much higher so it's impossible to tell if this is a bad time to enter the market.

International diversification helps alleviate all of these concerns. International stock markets seem cheaper than the U.S. market, so if one has a big stake in both, the risks of possibly high U.S. valuations are reduced. Same with the currency: If the USD goes up, I can benefit by buying even cheaper international stocks, and if the USD goes down, I will benefit as my significant international holdings increase in value. Does it mean I'll come out ahead in the short term no matter what? No, but it allows me not to worry a lot about these things.
I thought international stocks were cheap over the last 5 years and got my ass handed to me in terms of under performance and strengthened USD. I have since rebalanced to underweight foreign developed and overweight a bit on emerging with a refocus on US market. The US market will likely rise with slightly weaker USD if the change results in greater US export. If managed correctly, I think weaker USD is a good thing for the US economy.
« Last Edit: January 25, 2017, 03:59:38 PM by chesebert »

NP

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Re: Anyone worried about massive deflation of USD?
« Reply #11 on: January 25, 2017, 04:09:58 PM »
I thought international stocks were cheap over the last 5 years and got my ass handed to me in terms of under performance and strengthened USD. I have since rebalanced to underweight foreign developed and overweight a bit on emerging with a refocus on US market.
If you are unable to stay the course because of market movements over not very long periods such as 5 years, then your asset allocation was probably not appropriate for your risk tolerance.

In any case, I would be cautious about reducing the allocation to an asset right after its price has dropped and whose valuations have accordingly become more favorable.

maizeman

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Re: Anyone worried about massive deflation of USD?
« Reply #12 on: January 25, 2017, 04:14:15 PM »
You're right I was thinking backwards... apologies!

I also noticed consumer debt levels are the lowest I can see in history (my data goes back to 1980)... this to me would signal we are actually at the bottom of the market deleveraging and are primed for stock market growth in the coming years... but at the same time the market is already at an all-time high..

I'm not sure where to put my money. If inflation is on the rise and stock market is primed for credit driven ramp up, I should invest in stocks but the market is already super high, so maybe it will drop? Any speculators out there have a guess as to the direction?


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No worries, I catch myself mixing up directions of effects like that all the time.

Basically right now every time of investment looked at individually are either expensive (stocks) and/or risky (bonds). But you cannot look at stocks in isolation or bonds in isolation, because you have to put your money somewhere.

So are stocks particularly expensive given the alternative is putting money in extremely low interest bonds when the Fed is talking about raising rates significantly over the next two years? Not particularly.

Are bonds particularly risky, given the alternative is putting money into the stock market when PE ratios are quite?  Not particularly.

Telecaster

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Re: Anyone worried about massive deflation of USD?
« Reply #13 on: January 25, 2017, 04:30:18 PM »

Fortunately, the Trump transition team signaled a willingness to extend (punt) the debt ceiling deadline until later in the year, but the new Congress and President will need to address the debt ceiling issue at some point in 2017.  The next time the debt ceiling discussion comes up, you can expect to see proposed deep budget cuts, and with the GOP in control of all 3 branches of the US government, they'll get what they ask for.  We won't know right away whether those changes will be positive for the overall economy.  THAT is what *I* was thinking last night, and why I lost sleep.


The last times Republicans controlled all three branches of government was back in 2001.   At that time, they showed no interest in budget deficits at all.  In fact, they took small surplus and turned it into a large deficit.   

chesebert

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Re: Anyone worried about massive deflation of USD?
« Reply #14 on: January 25, 2017, 04:48:59 PM »
I thought international stocks were cheap over the last 5 years and got my ass handed to me in terms of under performance and strengthened USD. I have since rebalanced to underweight foreign developed and overweight a bit on emerging with a refocus on US market.
If you are unable to stay the course because of market movements over not very long periods such as 5 years, then your asset allocation was probably not appropriate for your risk tolerance.

In any case, I would be cautious about reducing the allocation to an asset right after its price has dropped and whose valuations have accordingly become more favorable.
Actually, the valuation for foreign developed is fair as of end of last year - in other words no longer cheap. I am taking a more active role in re-evaluating my asset allocation on an annual basis given all the stuff that's going on around the world. Set and forget AA doesn't work anymore.
« Last Edit: January 25, 2017, 04:50:30 PM by chesebert »

Indexer

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Re: Anyone worried about massive deflation of USD?
« Reply #15 on: January 25, 2017, 05:18:52 PM »
The constant back and forth of good news VS bad is what keeps the market efficient.

Example: There is something very big pushing the dollar the other way. Monetary policy! At the same time the Fed is tightening monetary policy many other central banks are loosening monetary policy. This pushes the dollar up against foreign currencies.

There are a lot of competing thoughts on this right now. It is highly unlikely you have more information at hand than the people who do this for a living so trying to play the odds is more likely to hurt you rather than help you.

Build a portfolio based on your investment policy statement. Stick to that.

Actually, the valuation for foreign developed is fair as of end of last year - in other words no longer cheap. I am taking a more active role in re-evaluating my asset allocation on an annual basis given all the stuff that's going on around the world. Set and forget AA doesn't work anymore.

Why doesn't it work anymore? Over time people who stick to their plan as a group normally outperform people who jump around as a group. Why would that change now?

It sounds a lot like "this time is different."
« Last Edit: January 25, 2017, 05:21:51 PM by Indexer »

theolympians

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Re: Anyone worried about massive deflation of USD?
« Reply #16 on: January 25, 2017, 07:18:35 PM »
Am In worried about massive deflation of the dollar? NO.

That question is clickbait for gold sales businesses.

TPP will be re-negotiated.

Livewell

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Re: Anyone worried about massive deflation of USD?
« Reply #17 on: January 25, 2017, 08:27:22 PM »
Am In worried about massive deflation of the dollar? NO.

That question is clickbait for gold sales businesses.

TPP will be re-negotiated.

Click bait for gold sales - exactly.  Peter Schiff anyone?


Mr Mark

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Re: Anyone worried about massive deflation of USD?
« Reply #18 on: January 25, 2017, 09:39:54 PM »
Am In worried about massive deflation of the dollar? NO.

That question is clickbait for gold sales businesses.

TPP will be re-negotiated.

Click bait for gold sales - exactly.  Peter Schiff anyone?

That's a nice pic! +1

I do feel a bit sorry for all those old people who got conned into buying gold and silver (and ammo) a few years ago from the likes of Glenn Beck et al.

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Re: Anyone worried about massive deflation of USD?
« Reply #19 on: January 26, 2017, 11:53:25 AM »
Am In worried about massive deflation of the dollar? NO.

That question is clickbait for gold sales businesses.

TPP will be re-negotiated.

Click bait for gold sales - exactly.  Peter Schiff anyone?

That's a nice pic! +1

I do feel a bit sorry for all those old people who got conned into buying gold and silver (and ammo) a few years ago from the likes of Glenn Beck et al.
If you listen to Glenn Beck et al, you deserve to get it good. Bigly.

maizeman

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Re: Anyone worried about massive deflation of USD?
« Reply #20 on: January 26, 2017, 12:15:55 PM »
Am In worried about massive deflation of the dollar? NO.

That question is clickbait for gold sales businesses.

TPP will be re-negotiated.

Click bait for gold sales - exactly.  Peter Schiff anyone?

That's a nice pic! +1

I do feel a bit sorry for all those old people who got conned into buying gold and silver (and ammo) a few years ago from the likes of Glenn Beck et al.

A few years ago? I was listening to talk radio on my way to work today (don't ask) and there was an ad for a "gold and silver IRA" in heavy rotation.

itchyfeet

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Re: Anyone worried about massive deflation of USD?
« Reply #21 on: January 26, 2017, 12:30:12 PM »
I thought international stocks were cheap over the last 5 years and got my ass handed to me in terms of under performance and strengthened USD. I have since rebalanced to underweight foreign developed and overweight a bit on emerging with a refocus on US market.
If you are unable to stay the course because of market movements over not very long periods such as 5 years, then your asset allocation was probably not appropriate for your risk tolerance.

In any case, I would be cautious about reducing the allocation to an asset right after its price has dropped and whose valuations have accordingly become more favorable.

+1

Chasing the market is not a good strategy. Just because the USD has appreciated against other currencies in the past 2-3 years does not mean this will continue.

Stay the course.

I'm a red panda

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Re: Anyone worried about massive deflation of USD?
« Reply #22 on: January 26, 2017, 12:50:20 PM »
I've been told to worry about something in investing for as long as I can remember--from Y2K to Greece to the US fiscal cliff.  It all turned out to be the rantings of crazy people.  Stay away from doomer sites and articles and you'll be peachy.

I'm pretty worried about the rantings of a crazy person right now though.  Because that ranting crazy person is in charge of the country...

I'm not sure I am worried about massive deflation of the USD though.

SwordGuy

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Re: Anyone worried about massive deflation of USD?
« Reply #23 on: January 26, 2017, 06:16:04 PM »
I'm seriously thinking of buying some gold and silver this year or next.  Hopefully the price will drop another 20% before I do.

Of course, I'm going to turn it into jewelry for resale at a profit...

MustacheAndaHalf

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Re: Anyone worried about massive deflation of USD?
« Reply #24 on: January 26, 2017, 07:51:48 PM »
Not suggesting panic, but several posters are incorrect about the dollar being strong right now.  The dollar has fallen slightly against several currencies.   It would be more accurate to say the dollar has fallen 2% against the Euro this past month.

http://www.x-rates.com/graph/?from=USD&to=EUR&amount=1
On Jan 1, $1 bought 0.95 Euro.  Yesterday the same $1 bought 0.93 Euro.
Again Jan 1, $1 bought 6.94 Chinese Yuan.  Yesterday $1 bought 6.87 Yuan.

I agree these are small and ordinary - but again I want to contradict those who claim the dollar has recently gotten stronger.  The data shows small drops, not strength.

maizeman

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Re: Anyone worried about massive deflation of USD?
« Reply #25 on: January 26, 2017, 08:38:04 PM »
I suspect it depends on what different people mean by recent. Itchyfeet mentioned 2-3 years.

In the past two and a half years, the dollar is up 30% against the euro, 36% against the british pound, 43% against the brazilian real, and 13% against the rupee, and 12.4% against the RMB.

chasesfish

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Re: Anyone worried about massive deflation of USD?
« Reply #26 on: January 26, 2017, 08:55:56 PM »
I still fail to see how any of this over a 15-20 year time period will materially affect the purchasing power created by either:

1) A diversified pool of equities, which represent fractional ownership in companies
2) Ownership in well maintained income producing properties

Those are the only two asset classes that beat inflation over long periods of time.

Outside of that, everyone has been yelling the next disaster is coming.  Now the folks who were right in 2000 and 2008 are held up as geniuses, regardless of the number of times they were wrong before

Indexer

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Re: Anyone worried about massive deflation of USD?
« Reply #27 on: January 27, 2017, 05:12:07 PM »
Not suggesting panic, but several posters are incorrect about the dollar being strong right now.  The dollar has fallen slightly against several currencies.   It would be more accurate to say the dollar has fallen 2% against the Euro this past month.

I agree these are small and ordinary - but again I want to contradict those who claim the dollar has recently gotten stronger.  The data shows small drops, not strength.

The Euro hit its lowest level against the dollar, in at least 10 years, this month. A 2% rise from the lowest point isn't exactly a comeback. That is a normal fluctuation. The EURO is still extremely low compared to the dollar right now.

Metric Mouse

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Re: Anyone worried about massive deflation of USD?
« Reply #28 on: January 27, 2017, 11:28:42 PM »
Am In worried about massive deflation of the dollar? NO.

That question is clickbait for gold sales businesses.

TPP will be re-negotiated.

Click bait for gold sales - exactly.  Peter Schiff anyone?

That's a nice pic! +1

I do feel a bit sorry for all those old people who got conned into buying gold and silver (and ammo) a few years ago from the likes of Glenn Beck et al.

A few years ago? I was listening to talk radio on my way to work today (don't ask) and there was an ad for a "gold and silver IRA" in heavy rotation.
Conservative talk radio? I've noticed this kind of doom and gloom 'buy gold' is played pretty heavy on those stations.

maizeman

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Re: Anyone worried about massive deflation of USD?
« Reply #29 on: January 28, 2017, 08:46:08 AM »
Metric Mouse,

Yup, conservative talk radio. (Is there such a thing as non-conservative talk radio? At least not in my little part of the world.) I agree, the doom-and-gloom is in heavy rotation with those folks. Also, a lot of the ads are no longer clearly commercials, but the host of the show just switching from whatever they were talking about before to giving the pitch for the company, saying they personally use the company, and then switching back to their original topic.

"I want to talk a moment of your time to talk about gold. In today's economic climate, volatility of the stock market, trillion dollar deficits, etc etc etc, I buy all my gold from goldline." <-- I hadn't realized these folks were even still in business, they're the ones who were selling old people selling gold eagles for 80% above the value the same coins go for at other businesses.


Metric Mouse

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Re: Anyone worried about massive deflation of USD?
« Reply #30 on: January 28, 2017, 09:25:47 PM »
Metric Mouse,

Yup, conservative talk radio. (Is there such a thing as non-conservative talk radio? At least not in my little part of the world.) I agree, the doom-and-gloom is in heavy rotation with those folks. Also, a lot of the ads are no longer clearly commercials, but the host of the show just switching from whatever they were talking about before to giving the pitch for the company, saying they personally use the company, and then switching back to their original topic.

"I want to talk a moment of your time to talk about gold. In today's economic climate, volatility of the stock market, trillion dollar deficits, etc etc etc, I buy all my gold from goldline." <-- I hadn't realized these folks were even still in business, they're the ones who were selling old people selling gold eagles for 80% above the value the same coins go for at other businesses.
Good point. Guessing 'conservative talk radio' was probably an easy guess. Per the link: Interesting to see Anthony Wiener's name in print, not related to a scandal. :D

ChpBstrd

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Re: Anyone worried about massive deflation of USD?
« Reply #31 on: January 31, 2017, 11:38:47 AM »
Metric Mouse,

Yup, conservative talk radio. (Is there such a thing as non-conservative talk radio? At least not in my little part of the world.) I agree, the doom-and-gloom is in heavy rotation with those folks. Also, a lot of the ads are no longer clearly commercials, but the host of the show just switching from whatever they were talking about before to giving the pitch for the company, saying they personally use the company, and then switching back to their original topic.

"I want to talk a moment of your time to talk about gold. In today's economic climate, volatility of the stock market, trillion dollar deficits, etc etc etc, I buy all my gold from goldline." <-- I hadn't realized these folks were even still in business, they're the ones who were selling old people selling gold eagles for 80% above the value the same coins go for at other businesses.

And these are the rubes claiming the unfair economy left them behind. Here's a thought. Quit listening to fake information all day.

ChpBstrd

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Re: Anyone worried about massive deflation of USD?
« Reply #32 on: January 31, 2017, 12:33:14 PM »
Deflation is defined as an increase in the purchasing power of money, i.e. a decrease in prices across a basket of goods. It is not to be confused with currency exchange rates.

The cause is a decrease in the velocity of money (i.e. a decline in trade). Money not changing hands as often means sellers of goods and investments cannot find as many buyers and have to cut prices. As expectations develop, deflation can become self-perpetuating, as in Japan.

Our experience with the Great Depression taught us that deflation is associated with:

-Tariffs and retaliatory tariffs that reduce trade.
-Bursting of investment bubbles.
-Tax increases that cause people to hoard for the tax bill and discouraging investment.
-Rising unemployment.
-Government restrictions on the movement of people and money.
-Falling interest rates.
-Reductions in the price of real estate, commodities, companies, everything...
-Bank failures (loan interest rates fail to compensate for rising value of currency lent out).

The current US government's policy is to reinstate tariffs, restrict the movement of people and money, and enable banks to take more risk of failure. I doubt the offsetting policies of tax cuts will do much, just as they didn't do much in the lead up to 2008.

Yet, I bet we avoid deflation for the following reasons: increasing tariffs with China and Mexico would create goods shortages that the US economy is unable to remedy (e.g. it will never be economical to grow winter strawberries or manufacture consumer electronics here). So a 20% tariff like DT just proposed to pay for his Great Wall of Mexico would show up on parts of your grocery bill. That's inflationary. Similarly, tariffs on Chinese manufactured goods will be passed on to the consumer. All this reduces aggregate demand by increasing deadweight losses (tariffs are the same as a tax on consumption). A recession could be the outcome.

More concerning, the US government is partially funded by the recycling of dollars sent overseas to pay for imports into government debt. If demand for imports drops due to tariffs and higher prices, demand for treasuries will also drop. The fed could be surprised both by inflation and by the spike in interest rates required to sell government debt. Pair tax cuts with decreased demand for treasuries and you have a loaded spring.

Or things could turn out totally differently. The current talk is that all these positions are "negotiating tactics." Maybe one's position is a referendum on how serious one thinks DT is about his proposals.

Retire-Canada

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Re: Anyone worried about massive deflation of USD?
« Reply #33 on: January 31, 2017, 06:03:19 PM »
I am taking a more active role in re-evaluating my asset allocation on an annual basis given all the stuff that's going on around the world. Set and forget AA doesn't work anymore.



"Stuff" has always been going on around the world and chasing returns has not worked in the past and is unlikely to work in the future. If you don't have an asset allocation you can stick with for more than a year you don't have a plan at all.

itchyfeet

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Re: Anyone worried about massive deflation of USD?
« Reply #34 on: January 31, 2017, 08:58:19 PM »
I am taking a more active role in re-evaluating my asset allocation on an annual basis given all the stuff that's going on around the world. Set and forget AA doesn't work anymore.

"Stuff" has always been going on around the world and chasing returns has not worked in the past and is unlikely to work in the future. If you don't have an asset allocation you can stick with for more than a year you don't have a plan at all.

Completely agree.

Changing your "strategy" annually is almost certain to result in selling low and buying high. It is not easy to assess whether a market is structurally under performing, or it is cyclic under performance.

The "Experts" are wrong as often as they are right, so you would have to be fairly arrogant to think your crystal ball is better than everyone else's.

My thinking is diversify, diversify and diversify some more. This way it is most likely that you will wake up each day with a little good news to offset the bad news of the day and you will be less reactionary.