inflation, deflation, and playing it safe

[jtollison78]

Can anyone suggest a good way to go about comparing different ratios of Gold, Government Bonds(short term?), and stocks over various periods during the last 100 years? I guess I'm looking for long term charts from each of these? Or maybe some program that has access to that information?

I'm more a little pessimistic about the future of our economy, but I can't decide whether a debt-default, money supply implosion, driven deflation is more likely, or if a helicopter drop might actually occur, so I am interested in hedging against both to whatever degree is possible.

Thanks,
John

[ahnuld]

Why would either occur? Both are easily fixed.

[jtollison78]

[ QUOTE ]
Why would either occur? Both are easily fixed.

[/ QUOTE ]

But, for whatever reason, both are often not fixed. Currencies and/or economies fall to these forces, and I wish to better understand the tools that are used to protect against them.

John

[kimchi]

[ QUOTE ]
Why would either occur? Both are easily fixed.

[/ QUOTE ]

With the current economic situation in the US, I don't think this is true.

Huge trade deficit, fiat currency, decreasing manufacturing base, increasing non-productive services, mammoth personal debt, record low savings rate etc etc.

I think the US economy has 2 ways to go, and there will be little the Fed or the government will be able to do about it in the short/medium turn.

A collapse of the dollar and hyperinflation.

Either way, I think the US is headed for some serious stormy times.

19th century: The British Empire
20th century: The US
21st century: make way for Asia

[LotteryOrPoker]

If the dollar collapses the world economy collapses and really have a doomsday scenario on our hands (which is highly unlikely). To the O.P. If you can find the answers to what economic pressures are more dangerous or beneficial you will solve a hotly debated subject. For example .. in Europe economists (generally, as a whole) believe inflation is more dangerous than deflation, while US economists believe deflation is more dangerous than inflation.

[ahnuld]

guys, do you understand any macro principles at all or are you just parroting some doomsday crap lou dobbs spews? If inflation peaks up, you increase interest rates and decreae the supply of money. That would be very costly in terms of causing a big economic recession but nothing worse than what occured in Canada in the 1980's when they reigned in inflation.

[ahnuld]

[ QUOTE ]
If the dollar collapses the world economy collapses and really have a doomsday scenario on our hands (which is highly unlikely). To the O.P. If you can find the answers to what economic pressures are more dangerous or beneficial you will solve a hotly debated subject. For example .. in Europe economists (generally, as a whole) believe inflation is more dangerous than deflation, while US economists believe deflation is more dangerous than inflation.

[/ QUOTE ]


no, if the dollar collapsed you would not have the world go to hell. And why would the dollar collapse? Huge movements like yuo are describing dont happen in free float systems only when governments get involved.

[ahnuld]

also I want to point out that a trade deficit is not a bad thing. It is pretty normal for growing economies to have a trade deficit, as there is not enough saving in the country to equal investments, so investment funds are supplied by foreigners who would rather invest in a growing US economy than a stagnant Japanese one for example.

[kimchi]

[ QUOTE ]
also I want to point out that a trade deficit is not a bad thing. It is pretty normal for growing economies to have a trade deficit, as there is not enough saving in the country to equal investments, so investment funds are supplied by foreigners who would rather invest in a growing US economy than a stagnant Japanese one for example.

[/ QUOTE ]

I don't live in the US and don't hear the same rhetoric you do, so I'm wondering what measure are you referring to when you describe USA as "a growing economy"? You mean increasing GDP?

In 2005, The US Treasury Secretary John Snow said that "Our economy is growing and expanding. Creating jobs and disposable income which shows up in our demand for imports." (paraphrased).

This is bollocks. The imports have been paid for in the form of IOUs to Asia. America isn't producing enough to hope to pay these IOUs in the future. At some point, the Asian central bankers will have to cash in those bonds and investments in America, but the Dollar will be toilet paper by then. They'll probably have to just buy whatever American products they can find (or American companies) and then ship them to Asia. This would cause imported goods to be super-expensive (The US manufacturing base won't be able to make the products US consumers want), and domestically manufactured goods to shoot up in price causing runaway inflation.

[jtollison78]

[ QUOTE ]
If the dollar collapses the world economy collapses and really have a doomsday scenario on our hands (which is highly unlikely). To the O.P. If you can find the answers to what economic pressures are more dangerous or beneficial you will solve a hotly debated subject. For example .. in Europe economists (generally, as a whole) believe inflation is more dangerous than deflation, while US economists believe deflation is more dangerous than inflation.

[/ QUOTE ]

I've haven't really been trying to figure out which is more destructive, but rather which is more likely. I've been at it on and off for over a year now with little success. I haven't given up, but now I'm mostly trying to figure out how to best hedge against both possibilities to whateer degree is possible, as well as the admitedly unlikely doomsday scenario. Black swans are the real killers.

John