I’m hoping the worst case scenario will be a Great Depression; rather than Hyperinflation. At least in a Depression our 1000.00 in the bank will still buy 1000 loaves of cheap bread. With hyperinflation that same 1000 could result in one loaf. We could easily see 20-25% annual inflation . This would cause hyperinflation in 2 or 3 years. If things get nasty it could come sooner.

It would signal the start of another collapse.

Were going to the one world currency whether we like it not.

High inflation is coming firstly because the East will recover faster than the West. This means that demand on industrial resources will go up; before we have fully recovered. We are already seeing this with the price of oil. (Always put some wealth in oil futures whenever oil is cheaper than it was)

Our situation could become quite unprecedented in modern Western history, as historically the West both sunk and recovered first) (not sunk then recovered last).

Inflation will also happen because Western governments have been forced to borrow large amounts of money from the world of finance yet cannot easily pay it back.
So (through “quantative easing”) they are already issuing surplus currency in order too meet debt repayment (this is unsustainable) as over time the real value of our currencies will reduce, so far this has only been (modestly) prevented by simultaneous falls in other world currencies, so banks are starving of financial disaster as engineers struggle without enough options or materials.

So why not put your money in property? The stuff is cheap but generally stabilising. It will fall more in value, but pays very good rental returns (around 8-10% if you look too the right places e.g. auctions).
Property could (and would certainly fall a lot more in another disaster) but historically (as long as governments have allowed both rent and land registries) it has never becomes as worthless as paper money, and financial products have become in times of financial stress.
Also if things continue to recover property prices will be one of the biggest "medium term" winners.

Just don’t borrow money with the assumption interest payments must remain cheap indefinitely. High inflation could easily have a dependant borrower-investor go bankrupt. After all property is only so cheap at the moment because most of the (hot) stuff on the market is from investors-individuals those who’ve gone bankrupt.
Investing wealth is certainly safer as you can’t have it pulled from under you’re feet like excessive debts can.

Heh...OP beat me to it; was just headed over here to post the same exact thread.

My take on it: We are currently in a mild episode of consumer deflation driven by the massive destruction of paper wealth over the last year. Yes, hard as it is to believe, more wealth has been destroyed than created, despite the Treasury and Fed throwing trillions and trillions ("everything but the kitchen sink") at the problem. Stocks are down, housing is down, most people have lost money in one way or another. This leads to falling prices, "going out of business sales," slashed paychecks...all deflationary rather than inflationary.

However, eventually all the credit creation and the running of the printing presses twenny-four-seven will start to kick in...the economy will lurch, sickeningly, from mild deflation to severe inflation. On the way, we will pass through a brief "sweet spot" where it seems like everything is OK again, prices will be on the rise, and you can bet the mainstream media will go into a frenzy of rapture and joy, trumpeting loudly how all is finally back on track.

This "sweet spot" won't last long, however, and will be followed by horriffic inflation as the government prints money to resolve its massive obligations and the US dollar abroad plunges in value.

Originally posted by wonderworld
I agree now is a good time to buy a house but many are hoping for deflation to lower them further.

Anyone who is able to buy thier first home should do it right now.

Once inflation takes hold (There's no if's about it) everything will become more expensive while a fixed payment mortgage will become cheaper. It's probably not a bad idea to spend money on things that will be more exspensive in the future. Provided that your cashflow situation is good and you're able to keep some cash in the bank to cover unexexpected exspenses.

Wages for skilled workers will also go up. The economy is starting to recover, but it is a slow return.

Business will start to hire and expand within a year?

I think hyper-inflation might be in check for now, but the threat is always there.

I think we are headed for a one world currency anyways. I don't think there is much anyone can do other than prepare.


[edit on 21-5-2009 by In nothing we trust]

As an answer to the OP, I don't think it's anywhere near time to get out the wheelbarrows just yet. Deflation has been the halmark of this crisis to date and I don't see that abating just yet. Like one of the previous posters said, so far most if not all of the raw printing has simply gone "poof" mostly to shore up insolvent financial institutions. So far the raw amount printed hasn't even kept pace with the destruction of available credit in the system. Until it equals and then outpaces that I am in the deflationista camp. Before I get jumped on by the resident golbugs let me add that I believe gold is an asset that will hold up well in deflation or hyper-inflation.

Aside from the printing not equaling the destroyed available credit yet, I believe one of the main reasons we are more likely to see continued deflation is that there is no mechanism to get a wage price spiral going. The last time the US faced high inflation(70's -early 80's), a much larger percentage of the workforce was unionized and had wage increases tied to inflation thereby feeding the wage-price spiral. I could easily see the Obama admin putting some type of wage controls in that would feed this, but I don't see that on the radar right now.

Another important reason I see deflation as more likely than Higher inflation (than we are used to) or hyper-inflation is who benefits most. In a deflationary environment cash and savings are king. As the deflationary spiral kicks in those in debt must repay that debt with more valuable dollars. The incentive to spend and grow is replaced by a need to save and possible pick up for pennies on the dollar the assets of those unable to service the debt in a deflationary environment.

Contrarily, in a higher-inflation/hyper-inflation, debts are repaid by devalued dollars. This benefits debtors in that they repay debts with currency that is less valuable than it was when the debt was incurred, and though that creditor gets repaid, the value of what he has been repaid is less due to the debasement of the currency.

Which of these scenarios will benefit the PTB the most I ask? The deflationary one especially when you've got a direct line to the taxpayers wallet via a bought and paid for CONgress.

I think we're going to see a slower collapse rather than an eventual SHTF mayhem scenario. I think we are collapsing now and have been since sept. IMO we're going to see what we see now continue for several years. Painful economic stress for millions of people, that will change their lifestyles dramatically. I hear everyones point of view on this too. I sub to Celente's Trends Journal for over a year and follow all the others as well, but think what Celente says is what I pretty much expect, life goes on but it might suck.

I might be wrong though hard to say? It's a mess and maybe it will just blow up mayhem, scavengers, Mad Max in 5 years or less?

I don't think there's going to be an inflation just yet. Why would they want the trillions and trillions of $$$ they just stole to become useless?

But that's just my opinion.