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Red River Valley | citoriskeet
Make no doubt about it the Fed can Kill Inflation won't be a problem they can't kill deflation they can only pump a bunch of dollars into the system if nobody will spend them then it does not matter how many they pump. Now the question is do they kill the dollar in the process. the one missing ingredent from the 70's that you don't have today is that in the 70's a lot of housewives entered the work force and you had the baby boomers coming out of college. These two things made for a lot of extra earning power. The one thing you have now that you didn't have in the 70's is a whole world of extra debt both goverment and private which may make the world lose all faith in our dollar.
You ask what is the perfect play from the Fed well I beleive if the Fed could have it their way they would like to see Inflation move to about 2.5 to 3% and bring Interest rates about 1/2% above that then use the long grind of time to get out of the mess. At that time they are going to need the goverment to bring the budget into balance or at least get it close. So the question is how do they do that well I think they will stop giving money to people in the top 10% of wealth in this country meaning that most if not all farm programs will be on the chopping block. probably raise taxes and cut payments to states and local goverments which will force those levels to raise more taxes our cut spending which will mean fewer services and higher land taxes. Think about Argentina and all the extra revenue they get out of export taxes on grains I would think that might even be on the table. remember farmers only make up about 2% of the voting public and almost always vote Republican so the Dems. don't lose much their but will look like they are fighting for the middle class.
As far as raising rates and killing the consumer once they get the funds through running the commad's up and burn them real good so that they don't get back into them for awhile then the higher interest rates will strenghten the dollar and bring down fuel cost which will save the avg. person that is working for a wage more money than higher Interest rates will cost them. I think they have a bout 4-5 months to try to get a little closer to the goal post then theyare going to try and kick it through.
The question you ask is how do you play it and the answer is your going to have to make that call for yourself because it will totally depend on what you belive is going to happen. some things to keep in mind are : deflation events can last for a decade or more inflation events usually only a couple of years hyper Inflation even shorter. If we get into a inflation event than the goverment can simply but in place price controls like Nixion did if grain prices start to run rampide export embargos like Nixion, Ford, and Carter put on will stop grain and meat prices in their tracks. Inflation can be stop on the things that we export with a signature what we import much harder to stop. Again if we get into a deflation event there is not much the goverment can do to force us to spend short of using the Tax code to entise us but first you have to have profits for that to work.
as for how to play it ; I would have some land ownership and I would want the debt to be locked in on Interest rates I would not want a lot of equipment debt unless you need the equipment to improve your margins. If you can lock in expenses along with sales to cover them I would start doing that. taking risk off the table is never a bad thing. even though everybody thinks the dollar is going to be worth nothing understand you will need enough of them to be able to meet at least a month of bill paying because the first thing that get's locked down in a crisis is credit so having enough cash to get fuel for harvest or planting is a must.
The one thing you need to do is not go overboard to any one argument loading yourself up with debt and hoping to Inflate your way out of it more than likely will not work remember there is very little chance that the power's that be will let food prices run rampet for very long because of the civil unrest that will be sure to follow thus the embargo's will be used IMHO also remember that there was more land lost in the great depression because they could not pay the taxes on it than was lost because of the morgatge. so if either of the extremes happen we are screwed and you will only have your family and enough clothes to get buy. But if you have the ability to work and produce something of value you will survive.
I would doubt that anybody that went through the 80's thought it was a good time while they went through it. Now as they look back if they were lucky enough to buy some land at or near the bottom they might look back now and see that they were able to build some wealth but at the time buying land for on tenth what it is selling for now was a very hard thing to do, I know I bought a 1/2 section of land and almost lost it three times before it was over, by about 1990 it was great used it as leverage to get more and and have done it two more times but at the time it was a scarry as you can imagine. Just remember that land is always a good investment over the long run but when the shi# hit's the fan bankers don't wait for the long run.
got way long and not sur it help's but that is what I remember from the past and what I am looking at in the future good luck to you and your's | |
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Funds, markets, & inflation
