What do you think will happen when the pot blows and inflation takes over?

[Madhatter]

massive inflation is about to over come the USA , that's not going to help sell anyones motorcycle ..... I filled my truck with gas last week it cost me 25 dollars more to fill the truck over what it cost me in January ..... paid 3.70 a gallon yesterday and almost 45 dollars to fill my mustang yesterday . products every where are increasing in price (you cannot print trillions of dollars and have them be worth anything , its a disaster we are all going to face ) its going to get bad . Harleys timing may be what does them in .

 

[OldRider]

massive inflation is about to over come the USA , that's not going to help sell anyones motorcycle ..... I filled my truck with gas last week it cost me 25 dollars more to fill the truck over what it cost me in January ..... paid 3.70 a gallon yesterday and almost 45 dollars to fill my mustang yesterday . products every where are increasing in price (you cannot print trillions of dollars and have them be worth anything , its a disaster we are all going to face ) its going to get bad . Harleys timing may be what does them in .

I agree with you. We can't just keep printing money and not expect to become a third world country. I would like to see another thread started about this subject and get everyone's idea's about how to be positioned for when it happens. ( I just started one)

 

[Madhatter]

checks wrecks would love to use his scissors on a political thread , because it will be political , no way around it .... my thoughts is to be a debt free as possible which means you don't buy anything and that is part of the problem . manufactures then don't make money and have to down size the work force which means more people with out money which means more printed money to support these people and that means .... you get the drift . huge depression and then a world depression and then unrest and wars and revolutions and massive numbers of people Dieing ..... remember the 20th century ..... will anyone remember being free ?

 

[OldRider]

There's some pretty smart folks hanging around this forum and I though I would start a thread and hear some of your idea's about what you thing our future holds.

The US is $28 Trillion in debt.
Prices are raising at a rapid pace.
Businesses are closing everywhere you look.
There are shortages of every kind of product you can think of.
People do not want to work.
The "Wokes" are trying to change everything.

What will happen when the pot finally boils over?
Is being in debt going to be a good thing or a bad thing?
If we get the Jimmy Carter interest rates back again, will having a mortgage at 3% and paying on it with inflated dollars be a good thing?
How high will interest rates go?
Will the stock market crash?
Inflation will take a bite out of cash, but is that still going to be the best place to be?

So, what do you think is going to happen in the next ten years? ........ Keep politics out of it..... It doesn't matter who you think got US to where we are. What matters is what do we do now.

Here is a site I go look at every few days for a reality check.

https://www.usdebtclock.org/

 

[PhilPhilippines]

I vote this...

 

[Madhatter]

I have been thinking of buying a 3rd bike ,something between my beta 300 and my super Tenere , but what I see happening here makes me pause . so I now have low buyers confidence in the future . and that will spread , and historically that moves the economy down . I remember 18 % interest rates of the late 70s early 80s . a 10k motorcycle at 18% will cost you hundreds more a month , not many will do that .
what I thought might be a good idea a dual sport or ( t700 or Kim 690 ) size bike to do BDR rides and leave the Tenere for touring and the beta for off road fun may not be smart as things unfold . as the dollar loses it value I expect prices on the bikes we like will start increasing . add the interest rates that will have to go up . not a good thing for anyone .

 

[Madhatter]

one more thing , I 4x8 sheet of cheap grade plywood over 73 dollars at the big box store . here's your sign .

 

[thughes317]

If we're going to add a ton more debt with an infrastructure bill, let's apply a lesson from history: pull people off the dole and put them to work on those infrastructure projects.....eliminate a majority of the welfare handouts and force able-bodied folks back to earning a living?

 

[fac191]

The World has been drunk on cheap money for so long now it's addicted to it. People don't want inflation or interest rate rises either. This is going to be a tough boat to turn.

 

[Checkswrecks]

checks wrecks would love to use his scissors on a political thread , because it will be political , no way around it ...

You're right if it's going to be political with just a bunch of "we [pick Republicans or Democrats] are right, they're wrong"

But as an active investor and regular day trader who actively watches this subject closely and usually has Bloomberg radio on, I can tell you it doesn't have to be that way.

Just keep the thread somewhat to economics and facts without attacking others.

And take it all with a grain of salt because the first two immutable Laws of Economics are:
1. For every economist, there exists an equal and opposite economist.
2. They're both wrong.

 

[pooh and xtine]

We've printed money to pay for the £500,000,000,000 we've spent on covid in the UK. The government won't raise interest rates because that would increase government debt repayments and they'll let inflation run away to reduce the value of debt in real terms. So cash savers will pay for covid.

 

[WJBertrand]

My first guess is we should replace paper money with lumber for currency... On a more serious note, I retained a financial planner a few years ago and though the market seems pretty bullish at the moment both he and I are anticipating tougher times ahead. He knows way more about money and the markets than me so we are working on strategies together. If inflation goes nuts, I don't think the current administration has any new tricks up their sleeve and I fear will resort to raising interest rates to quell the inflation, which will basically shut down the economy as happened in the 70s. They wont care about that, because it will contribute to the growing number of government support dependents that will never vote against the hand that feeds them. If such policies endure long term there will be not pathways out to government independence left to follow. In high interest rate environment it seems to me to make sense to pay down debts as quickly as possible and hold interest bearing notes/items and not stock. I remember making > 18% interest on money market funds back in the early 80s.

 

[OldRider]

You're right if it's going to be political with just a bunch of "we [pick Republicans or Democrats] are right, they're wrong"

But as an active investor and regular day trader who actively watches this subject closely and usually has Bloomberg radio on, I can tell you it doesn't have to be that way.

Just keep the thread somewhat to economics and facts without attacking others.

And take it all with a grain of salt because the first two immutable Laws of Economics are:
1. For every economist, there exists an equal and opposite economist.
2. They're both wrong.

You moved those post over from the other thread and now this thread starts on post #4. Why not throw the first 3 post out and give this one a clean understandable start?

 

[Jlq1969]

What would have happened if the US did not adopt an expansionary monetary policy? .... Inflation is within the consequences of an expansionary monetary policy .... and if it had not done it? .... there would have been a recession ?. .... the other, to avoid an expansive monetary policy, is a fiscal policy ... in the case of "motorcycles" it would be something like a 50% tax on the purchase of a 0km .... of 700cm3 upwards. So instead of issuing, the government takes out those who can contribute ..... the question today, after a year of the expansionary monetary policy is: what would have happened if it had not done it? ...... there will always be a part of the population, which will have to be supported by the state (which generally has an increasing growth rate). Who do you think they are going to take something from by force when they are in need? ..... then: 1 or 2% inflation for one or two years until everything returns to normal, it is not something cheap to pay, to keep that part of the population "calm" ???

 

[Checkswrecks]

If we're going to add a ton more debt with an infrastructure bill, let's apply a lesson from history: pull people off the dole and put them to work on those infrastructure projects.....eliminate a majority of the welfare handouts and force able-bodied folks back to earning a living?

To start out and to be open, I was a Tea Party CUT DEBT advocate. We need SOME taxes to have a Nation, we just have to watch the level of debt/GDP ratio because it is the ratio of being able to pay for what we have or want. We as individuals of course do this with our personal budgets and unfortunately for the country THAT is what has gone out the window at the National level.

Our current problems actually go back to Reagan, because he started the speeches vilifying the "welfare dole," "cutting taxes to grow the economy" (Laffer curve now proven wrong four times!), and "debt is not a problem."

But as jlq1969 noted there will ALWAYS be some unemployed and the chart below confirms the thought. Note that this goes well before what some people now consider the welfare state that began the 1960s-70s. That's why Reagan stopped pushing that line about "welfare queens" once he got past the first year+ of being in office and getting called out on it repeatedly. Even worse, the huge borrowing and spending during his Administration pumped up the markets to the 1987 crash which then pushed up unemployment for Bush Sr and cost him re-election in 1992.

So the charts and history show that we can set aside the idea that the problem is unemployment and number of people on the dole. Making matters worse, our actual low wage labor has ALWAYS come across the Southern border, like it or not. Having all those people willing to take jobs that 'Muricans would not take AND do them for cheap worked against inflation was good for the US. We all know how immigration has been going and now we are paying for it since the people left to do the hard physical work insist on real pay, pushing up prices. We also no longer have cheap labor in China or much of Asia to build our toys, because 50 years since they opened up they are largely a middle class society similar to the West. Even worse, since they are now consumers, we are competing for oil and resources, so more inflation. That also means the coming correction is going to be world level.

Clinton came in with the phrase "It's the economy." The difference from Reagan was that the Laffer curve (lower taxes to increase growth) idea was thrown out and by the time Clinton went out, there was actually a surplus for the first time in a long time. It happened because Clinton raised taxes to BOTH pay down the debt and create jobs and that is EXACTLY what Biden is trying to do.

But Biden has a big problem. Bush Jr borrowed like crazy to send us into wars that cost an average of one million dollars per soldier, so the debt took off worse than under Reagan. Unfortunately, Biden's Administration is contending with what was left of that, the Obama debt response to the Bush Jr collapse of 2007-2008 (which actually started to be paid down in 2015-2016), PLUS the unthinkable 2017 combination of both cutting taxes AND increasing spending. Although Trump pushed hard for it, the blame for that goes to McConnell and Ryan with Congress totally destroying the Tea Party concept by shirking their control of the purse.

So there's how we got here and the magnitude of the problem with charts to back it up.
To OldRider's question: Is inflation coming? No
It's already here and we have ourselves to blame.

To me - What this thread should be about are ideas for what WE as individuals should do to protect ourselves.

 

[Checkswrecks]

You moved those post over from the other thread and now this thread starts on post #4. Why not throw the first 3 post out and give this one a clean understandable start?

I'd have no problem in doing so but thought you & Madhatter would prefer to keep those. If Madhatter agrees, I'll delete them.

 

[Checkswrecks]

While the stock market is a totally different subject, here's where eI see us:

 

[Eville Rich]

All of these things are legit concerns, but there is a really whacky set of supply chain issues that is leading to limited supplies. With COVID a lot of global production slowed. Witness the chip shortage for vehicles and other tech. The Texas electrical grid issue has a big effect on any petroleum products. I'm getting some of my house insulated (sill box and a section of floor on a cantilever) with foam. My job is small, but a lot of larger commercial jobs cannot access enough foam insulation to do their job - all due to plants in Texas that had to shut down.

The price of stuff goes up, especially when the economy starts to rebound. It will be interesting to see how the global supply chains shift over the next six months. Part of the demand is driven by govt spending, though that has filled in some gaps. Assuming that tapers pretty soon, demand may fall or we'll see a transition to a more "normal" economy.

On the price of gas, removing the effects of state/local taxes, the price isn't that far off where things were in 2018. I think bouncing around $3 and $4 a gallon should be viewed as normal. The frackers need around $60 per barrel to produce and others withhold supply to keep prices up. At a very rough level, you will see gas prices at about a ratio of $21 per barrel per $1 per gallon. So $63 per barrel is roughly $3 per gallon. $4 per gallon equates to roughly $84 per barrel. There's always volatility and lead/lag issues in this, so it's just a coarse look. But at higher prices you get more players delivering oil to meet demand. But we all pay that marginal price. The cheapest producers just make more money.

Eville Rich

 

[Madhatter]

Cwrecks you can move the post ,if the post as said can stand alone and we can stay on topic then leave them . But current economics will effect Harley and others . So I add a few more thoughts . Your call . I’m hoping for stability in the economy so I can buy stuff. Harley is hoping for stability so they can sale a few more bikes . But printing money and keeping people out of the work place will eventually not end well for what ever nation that is being that irresponsible... Harley also knows it’s base and it’s short in seamed crowd . Nice touch the self lowering suspension. I was going to stop by the dealer on the way to the airport but bad weather was approaching so decided to forgo that . Maybe later . Really want to see one and sit on one .

 

[magic]

I wouldn't hit the panic button just yet. The economy will rebound as people go back to work. The supply chain problems we are seeing are a direct result of Covid-19. The unemployment rate here in Wisconsin is only 3.8%. There are help wanted signs all over the place and not only in the fast food industry. The law of supply and demand is what's driving prices up now and this should change as things get back to normal.

As for preparing your investments for a possible recession and stock market crash, think back to 2009. Think conservative investments like money market and annuities. I actually made money during the 2009 recession. I was 53 years old at that time and still managed to retire at 56. I subscribe to the idea that people close to retirement or already retired should not have all their investments in the stock market. The stock market is driven by fear and greed, why risk your retirement?

There seems to be a lot of stored up demand for any kind of recreational vehicle. Campers, RVS, ATVS, motorcycles, boats etc.. people have money to spend. There isn't much available around here, the motorcycle dealer's showrooms are almost empty except for Harleys and Goldwings. Again a result of supply chain issues.

The housing industry is what worries me. Houses are selling within a few hours of listing and for crazy high prices. People are buying houses without inspections and financial institutions are financing these houses sometimes without a down payment. A real estate agent recently told me that she is afraid of what may happen next year when the bills come due and prices fall.

It may take a year or 2, but we will get back to normal. The stock market will fluctuate like it always has and the sun will rise tomorrow morning.