Duke

How are you preparing for inflation?

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I'm interested in hearing how Objectivists out there are preparing for inflation, if they are doing so. If not, why not?

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I'm interested in hearing how Objectivists out there are preparing for inflation, if they are doing so. If not, why not?

Do you mean hyper-inflation as inflation has been going on for quite some time.

For example, John Rockefeller has been listed as the first person to make 1 billion dollars. The richest men in the world today are said to have around 60 billion dollars, but when one adds in for inflation Rockefeller would be worth around 380 billion dollars. The fight is not primarily with inflation, but the government that creates it.

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Learning how to trade every single asset class and trying to get to the US asap before visas get closed off, and accumulating as much capital as possible to store in hard assets and inflation linked bonds (e.g. TIPS - although you are taking a bet that the US government won't default on them).

Regarding inflation-linked bonds, it reminds me of the very amusing situation in Argentina where the serial defaulter/inflater government had to eventually issue bonds in USD. Let's just say the yield on those beasts is jumping these days, what with official inflation at 12% and unofficial so high the Argentines consider the USD a safe haven...

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Do you mean hyper-inflation as inflation has been going on for quite some time.

Different people have certain percentage per year definitions of hyperinflation so I just avoided using that term. I'm just wondering what Objectivists are going to be doing to prepare for increases in the cost of goods due to all the money creation that has gone on since 2008. Also, it looks like QE2 could be extended beyond what was originally predicted, and I have no doubt in my mind that there will be a QE3 (and more) unless the government balances the budget (which won't happen). Somebody has to buy up the debt, and it's not private equity that's doing it anymore. In fact, the Fed is set to surpass both China and Japan combined as a US treasury holder this year. A lot of people feel that QE2 is just a veiled monetization of the debt because buyers and drying up.

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Learning how to trade every single asset class and trying to get to the US asap before visas get closed off, and accumulating as much capital as possible to store in hard assets and inflation linked bonds (e.g. TIPS - although you are taking a bet that the US government won't default on them).

First question, why would someone want to be in the US of all places?

And as for TIPS, aren't they tied to the government manufactured CPI? I find it hard to believe that every place in existence is experiencing price rises except for the US, when the US has been printing like mad. If you look at every commodity out there, they've gone up dramatically. And prices at the stores seem to have gone up or the packaging has gotten smaller. I find it hard to trust that government statistic. It seems about as truthful as the creative fantasy novel known as the Financial Crisis Inquiry Report.

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Do you mean hyper-inflation as inflation has been going on for quite some time.

Different people have certain percentage per year definitions of hyperinflation so I just avoided using that term. I'm just wondering what Objectivists are going to be doing to prepare for increases in the cost of goods due to all the money creation that has gone on since 2008. Also, it looks like QE2 could be extended beyond what was originally predicted, and I have no doubt in my mind that there will be a QE3 (and more) unless the government balances the budget (which won't happen). Somebody has to buy up the debt, and it's not private equity that's doing it anymore. In fact, the Fed is set to surpass both China and Japan combined as a US treasury holder this year. A lot of people feel that QE2 is just a veiled monetization of the debt because buyers and drying up.

Before I speak or write on economic policies I like to recommend the two men I think are the most profound and integrated economist; Jean-Baptiste Say and Richard Salsman which is where my indepth and non-contradictory understanding of economics stems from.

Let us define our terms. Inflation is a decrease in the purchasing power of one's money, real goods. What causes this decline in the purchasing power of one's money? Two things cause inflation in America (and other countries with similar policies); 1) the Fed increases money supply in excess of the demand for dollar balances, 2) the demand for dollar balances declines relative to the supply of dollars. Now that one knows what inflation is and what causes it they might ask who (or what specific entity or entities) in America have the power to create inflation? The answer is the Federal Reserve and the Treasury Department both cause inflation, and in accordance to the two causes listed above.

I would think that this would lead one to ask some further questons which might look something like: If I did not cause inflation, can I control or stop the decrease in the purchasing power of my money in relation to the purchasing of real goods? The answer is, no. Knowing what the cause and consequences of inflation are should help one to recognize the path that must be taken if they are going to prepare for the creation of real change. On a day to day basis one might attempt to seek every tax avoidance stratgegy that is allowed by law and even buy cheaper products of similar types of goods to keep more of their money. But the real and only long lasting thing one can do to prepare for the future is to fight inflation at it's root, which is caused by irrational economic policies which are caused by irrational and corrupt government officials.

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Learning how to trade every single asset class and trying to get to the US asap before visas get closed off, and accumulating as much capital as possible to store in hard assets and inflation linked bonds (e.g. TIPS - although you are taking a bet that the US government won't default on them).

First question, why would someone want to be in the US of all places?

Because the US is worthy of fighting for.

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I'm interested in hearing how Objectivists out there are preparing for inflation, if they are doing so. If not, why not?

I'm day-trading GLD options in my Roth IRA and investing in my own home which has a big, low-interest, 30-year mortgage which I can afford to pay off, but won't.

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Learning how to trade every single asset class and trying to get to the US asap before visas get closed off, and accumulating as much capital as possible to store in hard assets and inflation linked bonds (e.g. TIPS - although you are taking a bet that the US government won't default on them).

First question, why would someone want to be in the US of all places?

Well, in my non-inflationary Switzerland, a courgette costs 1 CHF (at the moment CHF trades almost at parity with the USD). A meal will start at around 30 CHF (for example, a burrito at the Mexican downstairs' = 32 CHF for chicken, 36 for beef). My rent is almost 50% of my salary. A Burger King medium meal comes to 15-20 CHF (can't remember exact pricing).

In Paris, a pizza that used to cost 5 EUR now costs 20 EUR (medium sized pepperoni from Pizza Hut).

Let's not even mention emerging markets... where increases are in the double to triple digit % per annum.

Meanwhile, I can still eat a bowl of noodles in NYC for $3 and buy a house ten times the size of my current flat for $100k.

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Learning how to trade every single asset class and trying to get to the US asap before visas get closed off, and accumulating as much capital as possible to store in hard assets and inflation linked bonds (e.g. TIPS - although you are taking a bet that the US government won't default on them).

First question, why would someone want to be in the US of all places?

Well, in my non-inflationary Switzerland, a courgette costs 1 CHF (at the moment CHF trades almost at parity with the USD). A meal will start at around 30 CHF (for example, a burrito at the Mexican downstairs' = 32 CHF for chicken, 36 for beef). My rent is almost 50% of my salary. A Burger King medium meal comes to 15-20 CHF (can't remember exact pricing).

In Paris, a pizza that used to cost 5 EUR now costs 20 EUR (medium sized pepperoni from Pizza Hut).

Let's not even mention emerging markets... where increases are in the double to triple digit % per annum.

Meanwhile, I can still eat a bowl of noodles in NYC for $3 and buy a house ten times the size of my current flat for $100k.

While in Japan during 1990 I made a deal with a Marine friend of mine to take him and his wife out for dinner for carting me around before I received my international driving license. Where did they want to go for a paid dinner? McDonalds. During the 1990s the military had a deal with some fast food restaurants to provide their services on military installations and Burger King had won over McDonalds. On military installations overseas in the 1990s one could still buy hamburgers for 39 cents and cheese burgers for 49 cents. But off base, in the local Japanese market place, it was much more expensive to purchase these items and people did not do it that often, unless someone else was paying for it. So, we walked into the local McDonalds and my friend and his wife ordered four regular hamburgers, two large fries and two large drinks which came to a cost of more than $21. Twenty-one dollars is still not a lot of money, but in contrast to what I would have spent in an American McDonalds it was a big difference.

As a matter of fact gas cost about three times as much off base as on base. There was also a black market for almost everything of value, liquor, golf-clubs, cigarettes and much more.

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Learning how to trade every single asset class and trying to get to the US asap before visas get closed off, and accumulating as much capital as possible to store in hard assets and inflation linked bonds (e.g. TIPS - although you are taking a bet that the US government won't default on them).

First question, why would someone want to be in the US of all places?

Because the US is worthy of fighting for.

So if there is an economic crisis that is largely isolated to the US and the US currency, you want to be earning what will be a worthless currency?

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Well, in my non-inflationary Switzerland, a courgette costs 1 CHF (at the moment CHF trades almost at parity with the USD). A meal will start at around 30 CHF (for example, a burrito at the Mexican downstairs' = 32 CHF for chicken, 36 for beef). My rent is almost 50% of my salary. A Burger King medium meal comes to 15-20 CHF (can't remember exact pricing).

In Paris, a pizza that used to cost 5 EUR now costs 20 EUR (medium sized pepperoni from Pizza Hut).

Let's not even mention emerging markets... where increases are in the double to triple digit % per annum.

Meanwhile, I can still eat a bowl of noodles in NYC for $3 and buy a house ten times the size of my current flat for $100k.

Oh, you're comparing Europe to the US. Europe is in bad shape too but I think ultimately the Euro will be more sound than the US dollar. I eat at an all you can eat beef pork seafood and sushi buffet for $10 in Korea. (Last year it was $9 though).

The question is whether someone would want to move to the US and earn the US currency, when 1) The US recession hasn't been allowed to come and one could end up losing their job 2) There is no way of paying off the largest debt in the history of the world other than by printing the US dollars that you would be earning.

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I'm day-trading GLD options in my Roth IRA and investing in my own home which has a big, low-interest, 30-year mortgage which I can afford to pay off, but won't.

You buy futures options on the GLD ETF? Sorry I don't know that much about options. Is there any way for a more conservative investor who is sure that gold and precious will go up in the long term hedge against short term downturns?

That's a good idea with your mortgage, inflation will favour debtors. I will look into getting some kind of locked-in loan but I don't want a house and I am young and starting out so I don't know how easy it will be.

But I think housing prices are still overvalued. The government might phase out Fannie Mae and Freddy Mac over the next 7 years which should help lower artificially high home prices.

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Well, in my non-inflationary Switzerland, a courgette costs 1 CHF (at the moment CHF trades almost at parity with the USD). A meal will start at around 30 CHF (for example, a burrito at the Mexican downstairs' = 32 CHF for chicken, 36 for beef). My rent is almost 50% of my salary. A Burger King medium meal comes to 15-20 CHF (can't remember exact pricing).

In Paris, a pizza that used to cost 5 EUR now costs 20 EUR (medium sized pepperoni from Pizza Hut).

Let's not even mention emerging markets... where increases are in the double to triple digit % per annum.

Meanwhile, I can still eat a bowl of noodles in NYC for $3 and buy a house ten times the size of my current flat for $100k.

Oh, you're comparing Europe to the US. Europe is in bad shape too but I think ultimately the Euro will be more sound than the US dollar. I eat at an all you can eat beef pork seafood and sushi buffet for $10 in Korea. (Last year it was $9 though).

The question is whether someone would want to move to the US and earn the US currency, when 1) The US recession hasn't been allowed to come and one could end up losing their job 2) There is no way of paying off the largest debt in the history of the world other than by printing the US dollars that you would be earning.

Maybe you should study economics a little further before you make such generalizations about what can and cannot be done. And as a matter of fact my wife and I ate at Burger King today for less than $6.

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I'm day-trading GLD options in my Roth IRA and investing in my own home which has a big, low-interest, 30-year mortgage which I can afford to pay off, but won't.

You buy futures options on the GLD ETF? Sorry I don't know that much about options. Is there any way for a more conservative investor who is sure that gold and precious will go up in the long term hedge against short term downturns?

That's a good idea with your mortgage, inflation will favour debtors. I will look into getting some kind of locked-in loan but I don't want a house and I am young and starting out so I don't know how easy it will be.

But I think housing prices are still overvalued. The government might phase out Fannie Mae and Freddy Mac over the next 7 years which should help lower artificially high home prices.

When gold prices go up it is because of inflation and not a positive thing as it is a debasing of the currency.

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No, but unlike some I am willing to fight for what I consider to be of value to me instead of letting the looters get it for nothing which is what happens when one retreats or just plain runs from the enemy.

Option 1: You invest your money in foreign stocks, precious metals and commodities, at get it out of the US currency. You diversify your income streams to include payments from different currencies. You end up weathering the inflationary depression with a good standard of living. In fact, you can buy up more cheap American companies after the collapse.

Option 2: To be a moral patriot, you continue earning solely in the US currency. Instead of running from the enemy like a scared coward and buying Asian equities and dividend yielding companies that produce natural resources, you buy US treasury bills and and hold US dollars. Outcome: You are poor when the US government turns your savings into nothing. A Chinese businessman buys your house from you since you need money.

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Maybe you should study economics a little further before you make such generalizations about what can and cannot be done. And as a matter of fact my wife and I ate at Burger King today for less than $6.

Thanks for the tip Ray. I'll go and study economics. Congratulations to you and your wife, I hope you had a great meal.

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When gold prices go up it is because of inflation and not a positive thing as it is a debasing of the currency.

Enlightening as usual.

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When gold prices go up it is because of inflation and not a positive thing as it is a debasing of the currency.

Enlightening as usual.

Thank you as I alwasy strive to do so.

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I'm day-trading GLD options in my Roth IRA and investing in my own home which has a big, low-interest, 30-year mortgage which I can afford to pay off, but won't.

You buy futures options on the GLD ETF? Sorry I don't know that much about options. Is there any way for a more conservative investor who is sure that gold and precious will go up in the long term hedge against short term downturns?

Nope, which is why I day-trade.

In-the-money longer-term call options go up and down with the price of gold on a minute-by-minute basis and have a ready and volatile market. In addition, they are highly-leveraged and my options provide 4-5 times the benefits and risks of an equal amount invested in GLD shares. They are definitely not for the conservative investor.

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No, but unlike some I am willing to fight for what I consider to be of value to me instead of letting the looters get it for nothing which is what happens when one retreats or just plain runs from the enemy.

Option 1: You invest your money in foreign stocks, precious metals and commodities, at get it out of the US currency. You diversify your income streams to include payments from different currencies. You end up weathering the inflationary depression with a good standard of living. In fact, you can buy up more cheap American companies after the collapse.

Option 2: To be a moral patriot, you continue earning solely in the US currency. Instead of running from the enemy like a scared coward and buying Asian equities and dividend yielding companies that produce natural resources, you buy US treasury bills and and hold US dollars. Outcome: You are poor when the US government turns your savings into nothing. A Chinese businessman buys your house from you since you need money.

There is another alternative, I suggest the reading of the Declaration of Independence as a place one can start. And please offer a country from history that after a financial/social/economical collapse that there was anything to "buy up?" If there is a collapse to the extent being mentioned who would provide the legal structure to provide for the companies being bought? As a matter of fact what makes you think there would be peace after the collapse so quickly?

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Let us define our terms. Inflation is a decrease in the purchasing power of one's money, real goods.

I think this is too vague a definition. With such a definition, you'd have to consider price increases from supply shocks as inflation. That's not very useful. Purchasing power is a consequence, not a primary cause.

Inflation = increase in money supply, even if said increase is slower than the growth of the economy (i.e., when consumers don't experience price increases, only slower decreases than they would otherwise.)

Personally, I'm doing the following:

1) I have invested my money in gold and broad indices of stocks, with a large % outside the US.

2) I maintain a high debt on my low interest rate (8%) credit card, which I could pay off but do not.

3) I plan to develop an internet-based product which can easily generate money outside the US.

4) I have a US green card and a French passport, my son has both passports.

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Let us define our terms. Inflation is a decrease in the purchasing power of one's money, real goods.
I think this is too vague a definition. With such a definition, you'd have to consider price increases from supply shocks as inflation. That's not very useful. Purchasing power is a consequence, not a primary cause.

I disagree, but thank you for taking the time to give me/us your perspective.

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