Peter St. Onge from Brownstone adds to data from Peter Schiff last week supporting my case that the economy's gears are grinding to a halt behind the scenes.
30 year veteran of the commercial and residential development and home building industry here. Gee, who would have that artificially lowering interest rates to near zero and socially engineering the housing market would eventually be a bad thing? I certainly did back in 2008 when I worked in the home building industry and saw homeowners unable to pay HOA dues as low as $20 a month. This time around could be worse than 2008 and I’ve been saying that for a while now. Commercial real estate is the canary in the coal mine and the canary is dying.
Here in Germany, I'm seeing companies that have been around for a long time declare insolvency. The commercial side of real estate has to be under enormous pressure, but I'm not reading about in the news. My condo (1998) has no mortgage and the HOA fees are reasonable with money set aside for repairs in the future. Inflation however has been massive and food prices likewise. The Gov't is pushing to phase out natural gas. I have a heat pump and get hot water from the City. I will ride this economic cycle out. Home mortgages here usually have a 10 year term, so when it comes due, many are in for a shock as the interest rate has risen.
I believe the governing elites are too stupid, too corrupt & to out-of-touch with their citizens for that to even be possible. In other words, they don't know that they're lying or have been lying so long they are unable to see the truth.
I agree! In addition, the Gov't elites seem to have supreme confidence that they "know it all" and are 100% right. Unfortunately, such behavior by the corporate elites (people with wealth and power) has led to the downfall of many Companies in the past (Kodak, GM, some of the computer companies) and will lead to more so in the future. The classical Greeks wrote about Cassandra and my favorite goddess - Nemesis.
“In Germany’s Weimar hyperinflation, for example, early on people weren’t complaining about prices, they were popping champagne over how much money they were making on their stocks. The hunger came later”
I am an expert in high inflation, fiscal deficit and macroeconomic volatility, not because I studied a PhD, but because I had to operate in the Argentinean economy for 40 years. I lived through the Hyperinflations of the 80/90s and the recent period (now collapsing fast)
The first thing that you learn in inflationary economies is that it turns imposible to make economic calculus with the traditional tools. They will lead you to a mistake, like you clearly state in your article. In Argentina you can’t measure the economy in local currency, neither in a foreign currency, because there is exchange volatility, so the best way to measure the economy is by units. Weight, Tons transported, houses and cars sold, units solds, number of tickets, you name it. And even with this, you will not know, because everything is relative, but is better than look at just money indicators.
What happens in high inflation economy is that it turns into an economy of arbitrage. Some things get very cheap and others very expensive, like now in the US.
The working class gets the effect almost immediately, while the upper class expands it’s benefits because they can rise prices and keep costs down. But sooner or later, the middle classes gets affected too and stop buying things, default in it’s debt and help us God.
To be honest, I never experienced this scenario in a leveraged economy like the US, it could be chaotic for the US and the rest of the world.
There is a book from 2009 called “This time is Different”, by Reinhart and Rogoff, the answer is there. The US will go through a period of high inflation to deflate the debt, there is no other way out. Only the rich will be able to mantain certain wealth, the middle classes are going to be wiped out. The most conservative aproach is own hard assets, no debt (risk of refinancing will be high) and stick to strong cash flows. Act as your grandfather will do and you will be fime. It will pass too. But things are not going to be the same.
The separation of wealth has been ongoing for many years and Covid only exacerbated the trend...What is most amazing is how the middle and lower class can "feel" the pain being inflicted on them by the current policies of this administration and more so, Larry Fink and Vanguard...the top shareholders for over 88% of the S&P 500. Filling your gas tank should not cost $65...for a Honda Odyssey...But the real shame of this is are the manufacturers who have turned inflation into shrinkflation and then, by changing the size of the package and charging the same price for less, believe that Americans are Stupid and "won't notice"? By most accounts Americans are resilient...they will make better decisions by being forced to be resourceful...Yes, this does mean making sacrifices but the middle class' definition of sacrifice is much more patriotic than the wealthy class...we will go to Walmart for items we used to pay top dollar for at our local grocery store (in Florida it means not going to Publix) for all of our needs...and it means becoming more frugal for most necessities...The Middle Class does not sacrifice a Prime cut of beef for a Choice cut of beef because in most instances purchasing Prime was always considered a luxury. But in the end it is the fabrication and manipulation of data from or Bureau of Labor...rewriting HOW we calculate inflation or consumer prices...In the end for most of us in the so called middle class we have become smarter and more aware of how we are bing lied to by the very same people we once voted for...In the immortal words of John Mayer's Waiting on the End of the World, "When you own the information you can bend it all you want!"
I would like to do the same, but I'm unsure of where to put it. I have lost a lot of money over the last few years because it's being inflated away. I'd like to put it in real estate but worry about liquidity and the (likely) possibility of a crash. What are your "inflation proof areas"? Any recommendations?
Gold, crypto, land, and some real estate. If you look around bigger cities, find the cheaper land that is 2 towns over. Expansion is happening around those places, especially if there's a crime problem. There is where I live, so it has paid off for me.
Ok! Thank you for the answer. I've been looking into these things, but I had not considered what you say about outlying properties. Hmm, great thought!!
Also, I don't know what kind of land you ha e around you, but we bought some acreage and rent it out to farmers. No landlord/tenant headache. Don't have to fix anything, etc. And, you can almost always sell land for what you paid if you get in a crunch.
Anyone know how to figure how much the Federal deficit has been "reduced" by the inflation the last couple years? Inflation is one of the escape hatches for reducing the debt, just wondering how the recent surge stacks up, scale wise, with what would be needed to really make a dent.
I think I have shared this with you before, but please take my real-world stab at an Inflation Index that actually shows what the F is going on with real peoples lives. I call it the “ FILTH INDEX”.
The acronym is made up of the following:
F= FOOD
I= INSURANCE ( all types)
L= LIBATIONS (we need to drink more to soften the body/wallet blows)
T=TRAVEL (again, all forms)
H= HEALTH CARE
I would bet that a good/honest quant could quantify an Honest FILTH inflation level in just a few days/weeks.
It would be great to go head to head with the hedonic gruel that we are currently being spoon fed.
If you like this, please feel free to run with it and make it your own…no strings.
30 year veteran of the commercial and residential development and home building industry here. Gee, who would have that artificially lowering interest rates to near zero and socially engineering the housing market would eventually be a bad thing? I certainly did back in 2008 when I worked in the home building industry and saw homeowners unable to pay HOA dues as low as $20 a month. This time around could be worse than 2008 and I’ve been saying that for a while now. Commercial real estate is the canary in the coal mine and the canary is dying.
Here in Germany, I'm seeing companies that have been around for a long time declare insolvency. The commercial side of real estate has to be under enormous pressure, but I'm not reading about in the news. My condo (1998) has no mortgage and the HOA fees are reasonable with money set aside for repairs in the future. Inflation however has been massive and food prices likewise. The Gov't is pushing to phase out natural gas. I have a heat pump and get hot water from the City. I will ride this economic cycle out. Home mortgages here usually have a 10 year term, so when it comes due, many are in for a shock as the interest rate has risen.
I wish the Gov'ts (US, Germany, etc.) would be honest to their citizens what is coming ahead.
I believe the governing elites are too stupid, too corrupt & to out-of-touch with their citizens for that to even be possible. In other words, they don't know that they're lying or have been lying so long they are unable to see the truth.
I agree! In addition, the Gov't elites seem to have supreme confidence that they "know it all" and are 100% right. Unfortunately, such behavior by the corporate elites (people with wealth and power) has led to the downfall of many Companies in the past (Kodak, GM, some of the computer companies) and will lead to more so in the future. The classical Greeks wrote about Cassandra and my favorite goddess - Nemesis.
There would be a revolution...
“In Germany’s Weimar hyperinflation, for example, early on people weren’t complaining about prices, they were popping champagne over how much money they were making on their stocks. The hunger came later”
I am an expert in high inflation, fiscal deficit and macroeconomic volatility, not because I studied a PhD, but because I had to operate in the Argentinean economy for 40 years. I lived through the Hyperinflations of the 80/90s and the recent period (now collapsing fast)
The first thing that you learn in inflationary economies is that it turns imposible to make economic calculus with the traditional tools. They will lead you to a mistake, like you clearly state in your article. In Argentina you can’t measure the economy in local currency, neither in a foreign currency, because there is exchange volatility, so the best way to measure the economy is by units. Weight, Tons transported, houses and cars sold, units solds, number of tickets, you name it. And even with this, you will not know, because everything is relative, but is better than look at just money indicators.
What happens in high inflation economy is that it turns into an economy of arbitrage. Some things get very cheap and others very expensive, like now in the US.
The working class gets the effect almost immediately, while the upper class expands it’s benefits because they can rise prices and keep costs down. But sooner or later, the middle classes gets affected too and stop buying things, default in it’s debt and help us God.
To be honest, I never experienced this scenario in a leveraged economy like the US, it could be chaotic for the US and the rest of the world.
There is a book from 2009 called “This time is Different”, by Reinhart and Rogoff, the answer is there. The US will go through a period of high inflation to deflate the debt, there is no other way out. Only the rich will be able to mantain certain wealth, the middle classes are going to be wiped out. The most conservative aproach is own hard assets, no debt (risk of refinancing will be high) and stick to strong cash flows. Act as your grandfather will do and you will be fime. It will pass too. But things are not going to be the same.
The separation of wealth has been ongoing for many years and Covid only exacerbated the trend...What is most amazing is how the middle and lower class can "feel" the pain being inflicted on them by the current policies of this administration and more so, Larry Fink and Vanguard...the top shareholders for over 88% of the S&P 500. Filling your gas tank should not cost $65...for a Honda Odyssey...But the real shame of this is are the manufacturers who have turned inflation into shrinkflation and then, by changing the size of the package and charging the same price for less, believe that Americans are Stupid and "won't notice"? By most accounts Americans are resilient...they will make better decisions by being forced to be resourceful...Yes, this does mean making sacrifices but the middle class' definition of sacrifice is much more patriotic than the wealthy class...we will go to Walmart for items we used to pay top dollar for at our local grocery store (in Florida it means not going to Publix) for all of our needs...and it means becoming more frugal for most necessities...The Middle Class does not sacrifice a Prime cut of beef for a Choice cut of beef because in most instances purchasing Prime was always considered a luxury. But in the end it is the fabrication and manipulation of data from or Bureau of Labor...rewriting HOW we calculate inflation or consumer prices...In the end for most of us in the so called middle class we have become smarter and more aware of how we are bing lied to by the very same people we once voted for...In the immortal words of John Mayer's Waiting on the End of the World, "When you own the information you can bend it all you want!"
COVID was engineered to exacerbate the trend of taking the wealth of the middle class and transferring it to the "donor class".
Let's just say I've taken lots of money out of stocks and moved it to more inflation proof areas
I would like to do the same, but I'm unsure of where to put it. I have lost a lot of money over the last few years because it's being inflated away. I'd like to put it in real estate but worry about liquidity and the (likely) possibility of a crash. What are your "inflation proof areas"? Any recommendations?
Gold, crypto, land, and some real estate. If you look around bigger cities, find the cheaper land that is 2 towns over. Expansion is happening around those places, especially if there's a crime problem. There is where I live, so it has paid off for me.
Ok! Thank you for the answer. I've been looking into these things, but I had not considered what you say about outlying properties. Hmm, great thought!!
Also, I don't know what kind of land you ha e around you, but we bought some acreage and rent it out to farmers. No landlord/tenant headache. Don't have to fix anything, etc. And, you can almost always sell land for what you paid if you get in a crunch.
I like you approach. I have your exact same strategy
We've been in a Depression (not Recession) since the so-called "Financial Crisis" in 2008.
SNAP cards replaced soup lines, and the MSM covered it up instead of covered it.
Anyone know how to figure how much the Federal deficit has been "reduced" by the inflation the last couple years? Inflation is one of the escape hatches for reducing the debt, just wondering how the recent surge stacks up, scale wise, with what would be needed to really make a dent.
This is a great article
Chris
I think I have shared this with you before, but please take my real-world stab at an Inflation Index that actually shows what the F is going on with real peoples lives. I call it the “ FILTH INDEX”.
The acronym is made up of the following:
F= FOOD
I= INSURANCE ( all types)
L= LIBATIONS (we need to drink more to soften the body/wallet blows)
T=TRAVEL (again, all forms)
H= HEALTH CARE
I would bet that a good/honest quant could quantify an Honest FILTH inflation level in just a few days/weeks.
It would be great to go head to head with the hedonic gruel that we are currently being spoon fed.
If you like this, please feel free to run with it and make it your own…no strings.
Thanks for all of your great work.
Brian