Monday, May 4, 2015

Financial Rant

I haven't talked about financial affairs for a while; at least not macro ones.
There is a debate going on about whether we will have a massive depression or will it be hyper inflation.
I say "why not have both at the same time".
Harry Dent says that we are in for a massive depression because most of the debt is caused by banks lending out 10 time of what comes in in the form of deposits and such.  He feels that enough people will default on their loans from banks that it will cause a cascading event leading to a massive depression.
Some of the things that might lead to massive defaults are:

  1. Greece defaulting to the European Union.
  2. Detroit defaulting on it's bonds.
  3. Puerto Rico  defaulting on it's bonds.
  4. Massive student loan defaults.
  5. Another real estate collapse.
  6. Stock market collapse.
  7. Low oil prices bankrupting oil companies.
There could also be a black swan event which, by it's definition, is unforeseen.
Of course the government is trying to avoid all of these events and even some others that I've forgotten by printing incredible  sums  of money.
This is why so many of Harry Dent's detractors feel that we are going into hyper inflation. They feel that we will print so much money to avoid massive defaults that the money will become worthless.
It may seem to be contradictory to say that we can have inflation at the same time we have deflation but it happened in the 1970's when we had "stagflation". I feel that if the government pursues the path that it's on now that we will have more stagflation.
That's just my take, for now.
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