True a declining housing market is a deflationary force. But if the Fed goes hog wild with the money pump to try to prevent the deflation, we could get BIG inflation first. (Maybe deflation could be stalled for a while? Maybe the deflation takes over and negates the Feds most massive effort? Who knows for sure?) Inflation can also result from many people just having lots of money... and because they have it, are willing to spend + pay higher prices. Take the ridiculous example of the Gummint/Fed printing enough money to give every citizen $1Million... we could all pay off our debts and have LOTS of cash left over.. of course prices for everything would sky and the $USD would be worth less than a 6-pack of Charmin.
The Fed doesn't NEED to do anything at all to cause hyperinflation. All that has to happen is that foreigners decide they don't want to hold dollars, and all those dollars we already loaned will be cashed in as they roll out (mostly shorrt term), and the printed (paper or digital) dollars will be used to buy "things", driving up the prices of whatever they are used to buy, and leaving Americans holding the bag as the dollars and US government debt become worthless. When people even EXPECT money to go "bad" they will try to trade it like hot potatoes for something else, just like they did in Germany after WWI.
I remember reading that "paper" per say back in July 06, two years ago. The only FED member to truly tell it how it is. I started taking my own reserve cash and putting it into CDs tied to baskets of foreign currency. Let just say that move was one of the smartest moves I could do with excess cash. I keep very little US currency in a "bank" persa. While in the UK I opened a Savings account at HSBC and now have most my money in Euro's and HSBC is my primary banking. What sucks is that HSBC will not open a Foreign currency account to a US citizen unless you personally travel to europe to open the account, which requires your passport and copies of Financials. You also have to file notice with the US bank you use as well with your broker. The Patriot act now requires all reporting of 10,000 or more that leaves the country, including "staggering deposits below the 10k Threashold. Before there were loopholes, not anymore. Once you open a Foreign account, your on Homelands Watch List. They keep records of every dime that leaves the US to any Foreign Bank. Come tax time, you have to report gains....interest earned. It is a pain in the ass at first to bank off shore but once you get it up and running your gold'n. US banks will not allow you to convert US dollars to say the Euro and hold in in savings. There is a reason for it, im sure. But that article and the opportunity to go to London peaked my curiosity and I ended up opening an account. Of course, your "worth fluctuates' with the currency you choose. You can hold on to your US currency until you see a dip in the currency you want to exchange for. However, you want to do it in large sums because the "Transfer fees and "conversion" fees will eat you alive if you do small deposits, every month. I have a atm card /debt card that i use religously, tied to the HSBC account. I get charged a small fraction of "conversion" but I get a shit load of rebates to cancel out most of the conversion cost. So while, johny consumer is out spending his devaluing dollar to buy US goods, I smile every time I purchase, eat, drink, whatever as I use euros. Most of the sheeople will be to lazy, stupid or never have the opportunity to make such a financial move. I encourage all to do it. I don't give a rats ass if you fly to the UK for business, pleasure. Look into it and prepare your wealth for the storm that the Sheeople can't see. Like the Fed paper stated, its not coming in a year or two, but its coming. IMHO most of the sheeople will forget in a years time...just look at 911, many have forgot'n. Hedge your self, America is dying.
How much did gas go up last year? Milk? Eggs? Bread? Cooking oil? Coffee? Rents? Ok, what didn't go up? Housing Wages Look at gold and silver and oil and average over a period of time if you want to see the real inflation rate. Its the real rate at which your money is being devalued, IMO.
hyperinflation is 20-50% per month or greater. it's a possibility in our lifetimes but not in the foreseeable future. to reach those levels of inflation, the gov would have to print large amounts of money comparable to the national gdp, in a matter of months. we're nowhere near those levels. it could also happen if there was a sudden catastrophic event, such as a massive war or a pandemic that kills of tens of millions of americans in their 30s and 40s (prime working years), thereby reducing total productivity and increasing labor demand. cutting rates from 5% to 1% won't cause it
The definition of "hyper" may be semantic. We don't need Rwanda-like inflation to destroy us. Some significant rate for several years will do it. Of course, if we lost 99.999% of our buying power to inflation and currency debasement, all of us would be busted. Same would be true for 99.9%. But what about if we lost "only" 99%? Or would you be broke at -90%? -75%
And, it's not like the Gummint/Fed will stop inflating/debasing when we've lost 75% "because we better stop this now and save what we can before we blow EVERYTHING"... once we get on that path, the end result historically has effectively been bankruptcy and issuance of a "new" currency with a few zeros lopped off.
One thing people forget about hyperinflation is that its good for the stock market. The stock market benefits from high levels of inflation, it gets crushed during deflation. If people think we will go into a high inflation period and think stocks are bad investments, they need their head examined. In inflationary periods, the worst investment are bonds and short-term cash. Real estate, stocks, and commodities are great investments in high inflationary times. Inflation doesn't hurt the rich, its hurts the poor, those that don't own stocks or real estate. That's why the Fed suddenly going into money printing mode by lowering 75 bps is short-term bullish for markets. In the long run, who knows, they might actually care about inflation but I know Bernanke is definitely not a hawk and isn't shy about pulling out the liquidity hose even before recessions start.