boedicca
Uppity Water Nymph from the Land of Funk
- Feb 12, 2007
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Food prices are going up due to bubbles bursting in other classes of assets, Real Estate, Bonds, with a flight to commodities. It's a blip now compared to could happen if Treasuries crash.
No they would not: They would get out of Treasuries—supposedly the “safest” investment there is—and get into something even safer—something even more tangible: Actual commodities. Not ETF’s, not even futures (or anything else that entails counterparty risk)—sellers of Treasuries would get into actual, hard commodities. Because if suddenly even the safest of all investment vehicles is now unsafe, do you really want to get behind the wheel of an even more unsafe vehicle, like stocks or corporate bonds or ETF’s? I mean, c’mon: If Treasuries crash, what else might crash?
That’s why people in a Treasury panic would buy commodities. This ballooning of non-perishable commodities would be as a means to store value. Because that’s what people do in a panic—they batten down the hatches, and go into what’s safest. When the stock markets tanked in the Fall of ’08, where did all that sellers’ cash go? To Treasuries—because it was then considered the safest store of value. Commodities suffered in comparison—gold took a bit of a hit, as did the other precious metals—but Treasuries ballooned as the equities markets tanked.
But if Treasuries—the ultimate store of value—now tanked? If the last sure-thing in paper-based stores of value took a hit, where would people go to both store value, and have ready access to that value?
Commodities. And this rush to commodities, I argued, would trigger hyperinflation.
Now, I said I would answer two questions—one was why commodities would outpace all other asset classes in a Treasury panic and subsequent hyperinflation. The other question was, “Where’s all the dough to feed my fireplace gonna come from, in a hyperinflationary event?”
The first wave of dollars in a hyperinflationary event will come from people’s savings accounts.
If Treasuries tank, and the markets all barrel into commodities, then prices will rise for regular consumers—this should not be a controversial inference. What would consumers do, with suddenly much higher gas prices, and soon much higher food prices? Simple: They’ll bust open their piggy banks, whatsoever those piggy banks might happen to be: 401(k)s, whatever equities they might have, etc.
But if the higher consumer prices continue—or become worse—what will happen to the 320 million American consumers? They’ll start buying more gas now, rather than wait around for tomorrow—and the market will react to this. How? Two way: Prices of commodities will rise even further—and asset prices will fall even lower.
Hyperinflation, Part II: What It Will Look Like - Truth is Treason
No they would not: They would get out of Treasuries—supposedly the “safest” investment there is—and get into something even safer—something even more tangible: Actual commodities. Not ETF’s, not even futures (or anything else that entails counterparty risk)—sellers of Treasuries would get into actual, hard commodities. Because if suddenly even the safest of all investment vehicles is now unsafe, do you really want to get behind the wheel of an even more unsafe vehicle, like stocks or corporate bonds or ETF’s? I mean, c’mon: If Treasuries crash, what else might crash?
That’s why people in a Treasury panic would buy commodities. This ballooning of non-perishable commodities would be as a means to store value. Because that’s what people do in a panic—they batten down the hatches, and go into what’s safest. When the stock markets tanked in the Fall of ’08, where did all that sellers’ cash go? To Treasuries—because it was then considered the safest store of value. Commodities suffered in comparison—gold took a bit of a hit, as did the other precious metals—but Treasuries ballooned as the equities markets tanked.
But if Treasuries—the ultimate store of value—now tanked? If the last sure-thing in paper-based stores of value took a hit, where would people go to both store value, and have ready access to that value?
Commodities. And this rush to commodities, I argued, would trigger hyperinflation.
Now, I said I would answer two questions—one was why commodities would outpace all other asset classes in a Treasury panic and subsequent hyperinflation. The other question was, “Where’s all the dough to feed my fireplace gonna come from, in a hyperinflationary event?”
The first wave of dollars in a hyperinflationary event will come from people’s savings accounts.
If Treasuries tank, and the markets all barrel into commodities, then prices will rise for regular consumers—this should not be a controversial inference. What would consumers do, with suddenly much higher gas prices, and soon much higher food prices? Simple: They’ll bust open their piggy banks, whatsoever those piggy banks might happen to be: 401(k)s, whatever equities they might have, etc.
But if the higher consumer prices continue—or become worse—what will happen to the 320 million American consumers? They’ll start buying more gas now, rather than wait around for tomorrow—and the market will react to this. How? Two way: Prices of commodities will rise even further—and asset prices will fall even lower.
Hyperinflation, Part II: What It Will Look Like - Truth is Treason