Here is the final installation of "Picking Up Where I Left Off." Using Kollin's emails has really helped me get back on track. I hope everyone enjoys this last one, and a special thanks to Kollin for always making me think about really tough questions.
Kollin:
http://mises.org/daily/6674/
I think it's undeniable to say that at some point fiat currency will be worthless.
Brad:
I agree with you. It's undeniable that inflation (maybe German-style hyperinflation) will render fiat currencies worthless.
Timing wise, I believe the economy will have to suffer a few more bubbles bursting and a few more fed bailouts before we see any outrageous inflationary numbers. The reason being the US economy is so insulated against inflation because of our fore-fathers' great prudence and accumulation of hard capital assets. Any other country with less capital assets - practicing the Federal Reserve's printing levels - would surely have fallen long ago (think Greece, Crete, Italy, and other EU countries suffering from massive unemployment and inflation at the same time).
The manifestation of the Fed's current policy will be seen in more bubbles inflating and bursting, more tax-payer funded bailouts for "too-big-to-fail" companies, and a creeping erosion of our capital base and production abilities. The prices of oil, gold, and the Producer's Price Index will continue to climb and eventually skyrocket (all three are indicators of the coming inflation because the highest orders of production goods suffer from inflation first).
How can we prepare for it? Personally, I buy about $100 worth of silver every two to four weeks. If I had more money saved up I would keep about 1 year's worth of expenses in cash, invest about 10-20% of the remaining in gold, silver, platinum, and palladium, and diversify the rest into companies that own hard assets (mining companies that have both land and equipment being a good example). Avoid .coms like Facebook and Twitter like the plague. Peter Schiff did a great piece on the Tom Woods Show I'll link to below.
Here's some articles I've read in the past that helped me come up with my answers. I hope this helps!!! Thanks for the questions. I always enjoy our conversations.
Brad,
ReplyDeleteOne thing is that no matter how you look at it we are definitely in a state of inflation already, and we have been for quite some time. The effects of inflation have been artificially suppressed by the Fed, you've already touched on some of the ways that they've been "protecting" us from the effects of many years of failed economic policy.
My question to you; Economies have a natural cycle of ups and downs, acting as a sort of cleansing processes controlled by supply and demand. What is going to happen when you have politicians that think they can control a natural force of downward economic pressure by flooding it with more printed money, controlling interest rates, and effectively buying failed businesses finally collapses under pressure? I think that "German-style hyperinflation" is putting it mildly.