Umpatan

Just before hyperinflation sets in worldwide, many are running to precious metals. That may be fine and dandy, and I am sure that they will be winners. But I think playing the game of FIAT on credit back on the system and playing the joke back is even better. As for myself, I decided that rather than buying Gold and Silver ETF's going out and looking to buy a small bachelor suite appartment while mortage interest is cheap is far superior. Why I say this is that even in the Weimer Republic and Zimbabwe where hyprinflation devalued their currencies, those who purchased property with fixed interest rates before the hyperinflation set in, still paid their interest on their mortgage at the old rate, and paid back their debt with their hyperinflated dollars, making their property a bargain. When the inflation surpasses the rate of interest owed to the bank by thousand fold, owning real estate will be the best form of investment. Not to mention one would be able to make money renting it to others during the olympics, thereby offsetting the depreciation of the real estate value before the bottoming out takes place. Now the FIAT game can be played back to the system in a legal fun way, playing the joke back to them.

bodgerx

Que?

MikeUK

You're track record is not exactly excellent is it....

take note

Auld Yin

OMG, he's off again!!!!

Stu-pot

If i were you i'd be nice to the folk on here so that they give you some karma, then you can play karma fun - this time when you get panned its only karma you lose not $

MB-Realtor

Ok I'll take the bait......

One of the consequences of governments printing money is inflation, in this case they intend to provoke a modest inflation and stimulate the economy.

Are the collective brains of the wests governments skilled enough to balance the diverse parts of the world economy, who knows, I don't.

There will no doubt be unforeseen consequences of their actions as there so often is with any governmental action, but I seriously doubt that hyper Inflation in Canada, or any of the main western economies, will be one of the results. Now a Country like China, them I could see pushing the envelope on direct action and causing more problems than they will solve.

MarkG

Except, from what I remember, you could buy a house in Weimar Germany for a couple of ounces of gold during the worst periods of hyperinflation.

Just because inflation pays off your debts for free in such a situation, that doesn't mean that real estate will maintain its value better than more liquid assets.

MarkG

If they were, we wouldn't be in the situation we're in now; the People's Central Economic Committee can't balance the economy even in theory, let alone in practice.

From what I've read, money supply in most Western nations is increasing 10-20% a year thanks to all the bailouts and 'quantitive easing' (aka money printing); while I doubt we'll see Weimar-style inflation, if the banks start lending again that's a vast amount of new money they can throw into the economy thanks to fractional reserve banking. If the central banks do try to cut the money supply you can bet it will be by too little and too late.

And if the Chinese start dumping dollars as they're threatening to, that will lead to substantial inflation in the price of any goods imported from China.

ESarge

There will be inflation - but it won't be hyper.

The US Government, especially via the Federal Reserve, has been increasing the money supply (aka 'printing money') greatly throughout this crisis. It's just that households and businesses haven't felt confident enough to spend it.

Once confidence returns, that extra money will be spent and we'll get inflation. The interesting question is whether there will be political will enough to raise interest rates at that point to forestall inflation or whether the Fed will be pressured to keep them low because 'this is just the start of the recovery'.

A scenario with hyperinflation in the G7 countries is very unlikely.

Property is a generally a good bet during times of inflation. However, it will depend on how your interest rate is set. If it has some form of floating component or fixed for a period less than the loan then I'd expect it to rise greatly to recompense the bank (and the bank's investors) for the cost of inflation. The numerical value of the principal will remain the same which will help a lot.

MB-Realtor

For the average person Property should be considered as:-

1) a place to live, and with ownership comes a certain amount of security and the ability to modify your home to suite your needs (within certain constraints) it should not primarily be considered as an investment opportunity.

2) It should never be considered as a short term investment, though it has bought short term returns in the past this can not be relied upon.

3) During the past 100 years property has been a good long term investment, I don't see that changing and in the long term (10+ years) you should always see a profit in the value of property.

It may not be the best return for your money, if in 1972 you had bought a home for $5000 it would be worth about $250,000 now, if on the other hand you had bought $5000 worth of WalMart shares they would be worth $6,250,000 If only I had a time machine

Alan2005

I'm actually inclined to agree with the OP - Me and the missus have a pot of cash we will be using to buy a house; we've bought our plans for buying forward from next year to this. Not cos i've become bullish on property, but cos i'm now very bearish on cash. I'd rather take the likely 20% further reduction hit than take the (probably very small) risk of high (or even hyper) inflation.

Must remember to fill the basement with beans, canned tuna and tin foil hats once we have somewhere.

Novocastrian

I think you and the (clearly mad) OP, should move in together.

Umpatan

You make some good points, and I agree that property will not percentagewise make more money than say gold bullions. But, that is given that you buy the property oughtright, and you have 200,000 dollars to buy it. Whereas with property, with a fixed rate of interest for the entire loan being low, and one would only put down say $30,000, the value of the property increase with $30,000 down on 5% interest with a tenant paying your rent on short term lease contracts so you can collect to keep pace with inflation each time the lease agreement runs out, you would make more money with the property of $200,000 in today's dollars than $30,000 worth of Gold bullions that simply sit in your safe.

Umpatan

How much inflation are we talking about? But how would they be able to service the trade deficit without hyperinflation. I know many of us are in denial but there is absolutely no way around it. Name me couple methods around hyperinflation to balance the trade deficit?

Alan2005

Selling energy and resources - Canada has those in spades.

However an economy based purely on selling natural resources has a tendency to eventually create inefficiencies. Why improve to get that extra 10% when you are already rolling in cash? (c.f. Venezuela, Russia etc).