[sailaway21]

Originally Posted by wind_magic

I agree this will probably be the end result, but I don't think it will happen yet.

Right now it's all about deflation. People are scrambling to put away cash for the long winter. No matter how much money the government prints and throws out on the street, people are going to do exactly what the banks are doing, they'll take the money and put it away and say thank you very much, but they won't spend it. The Fed is pushing on a string, they can't spur the economy on because no matter who they give money to, nobody is willing to lend it, or borrow it.

Later, some day down the road, all that money will come out of the vaults and out of people's pockets, but I don't think there is a lot of danger of that right now. That's usually something that happens on the other end of a deflationary bear market, not at the beginning of it. An example is silver which is at the moment back down below 10$us/oz. People are not bidding the price up, even though silver is an absolutely terrific hedge against inflation, instead they are selling their silver to buy cash despite the fact that the Fed is printing more and more of it. People are pulling cash out of the economy faster than the Fed can put cash into it.

Hyperinflation is more a product of war. During war the government is stuck, especially if they are losing, because they can't get anyone to lend them money and they have trouble increasing taxes, so all they can do is inflate the money supply to buy the things they need. They will even hyperinflate the currency, even when they know it's destroying the economy, because it's better that than lose the war - they figure they don't have a choice. In normal times no government would let their currency devalue that much if they had any choice at all. War is always associated with gold for that reason, because gold becomes the only safe hedge against wartime currency devaluation, it becomes the only currency that anybody will trust.

I'm not sure you've got this exactly correct, Windy. And I know that you and I agree with Mr. Buffet and not the practice of most investors. It's too late to put your money into cash or even gold. But fear is rampant. And as Warren B says, you need to be greedy when others are fearful. When others are greedy you need to be fearful. Overlooking good buys awaiting the bottom of the market is just plain foolish. And there are many good buuys out there.

I think you're backwards on hyperinflation and war. Hyperinflation often precedes war, the best example being the Wiemar Republic's attempt to print it's way out of depression. The lack of any economic success internally makes it palatable to export, or blame, the problem on external factors. War is a logical solution then. You're correct though, in that war can lead to hyper-inflation as soon as it becomes doubtful as to the viability of the full faith and credit of the government.

I feel somewhat comfortable compared to many in that I have a job that is somewhat recession proof. As a well driller my services are steadily in demand. From a personal standpoint it appears that my procrastination on the kitchen project in the new house may end up being fiscally prudent. (as if I knew this in advance!, hah!) The numerous big ticket items, as well as core materials, are likely to become much more inexpensive to purchase with retailers looking to move things like ovens, refrigerators, and cabinetry at much lower profit margins just to keep cash flow going. The manager of the local Home Depot turned down my insanely low offer on one of his three top of the line Honda mowers a month ago. He stated that since there will be no new model next year he was content to sit on the three over the winter until spring demand arrived. I'm anticipating that that demand will not materialize, and since those mowers that will be stocked in the spring are already ordered and on ships now, I'm anticipating a glut of Honda mowers at the Home Depot. With a dearth of buyers, I expect my insanely low offer will be more appealing.