Money As Debt

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This one is for Awgee - from a vending machine in Japan:





<img src="http://i191.photobucket.com/albums/z188/annsalisbury/ForAwgee.jpg?t=1192048643" alt="" />
 
Now we know why Countrywide wasn't affected by the run on their banking arm. They weren't loaning their deposits, they were loaning money that didn't exist.
 
Money as Debt was great. I had never really thought about some of that stuff. Thanks IR. I had always had the basic idea that one is very rewarded for saving money, and this just shows how much one (or, the Bank) really can be.
 
All "money" in a fiat based monetary system with fractional reserve banking is debt. I am not being extreme. That is just the facts, maam.
 
After spending a great deal of time reflecting on this video's contents...





I'm starting to wonder if the savers are going to be forever punished. The Fed claims that inflation is a big concern, but I don't think they view it as a tenth of a concern as deflation based on what this video says.





If the Fed will forever inflate the currency to stave off any deflation, then perhaps those that save will always be punished over the people that wisely take on debt for investments.





Anyone have thoughts on this? I really hate debt and I've worked my ass off to finish mine off at the end of this year (this has been years in progress).





But regardless of how virtuous I think it is to save money, I wonder if it's just a sucker's game to save.





Any thoughts on this?
 
jw - Debt is destructive. In order to accumulate, one must save and receive an ROI greater than the increase in money supply.
 
My thought was borrowing 2007 dollars before severe inflation would be easy to pay off in inflated dollars later on and on top would yield investment moneys.





Trust me, I really hate debt. But I don't want to be the sucker standing on the sidelines either.





If B-52 Ben and his cohorts are trying to run the economy into the ground, I'm just trying to figure out how to take advantage of it since I can't stop it.
 
<i>"My thought was borrowing 2007 dollars before severe inflation would be easy to pay off in inflated dollars later on and on top would yield investment moneys."</i><p>


The problem with this plan is that one can not be sure that one will be a recipient of inflated dollars. Hyperinflation is an extreme, rare event and exactly how it will play out is anybody's <b>guess</b>.
 
If hyperinflation becomes a reality, the cost of borrowed money will be very high. Banks do not want to receive devalued currency in return for what the lend out. They will want to make a profit above and beyond inflation.
 
That's assuming you borrow during a period of hyperinflation, correct IR?





I was wondering if it's wise to do it before severe inflation and bank on the inflation happening.





I get what awgee is saying in that you can't predict it. But assuming you could...
 
jw - Sorry, I should have been more clear. I was trying to say that it would be very difficult to know if you would be the recipient of inflated dollars; not just that it would be difficult to know what the macro scene would be. Suppose you went heavily into debt. Severe inflation becomes more obvious. And what if you do not get paid more? What if everything else costs more, but you are not making more money. In that case, you have more debt and more expenses?
 
<em>"I was wondering if it's wise to do it before severe inflation and bank on the inflation happening."</em>





To do this, you would have to outsmart the economists at the bank (of course, that doesn't look too difficult given their track record of the last 5 years.) Banks will raise rates in anticipation of inflation. They won't wait around for it to happen. That being said, if you were to correctly anticipate hyperinflation ahead of the banks, and assuming you could find an asset class which appreciates faster than the interest rate on your bank loan, you could come out ahead using this strategy.
 
if hyperinflation ever happened i think we'd have bigger problems to worry about than a bit of arbitrage against your bank.





i'm already peeved that an onion at ralphs cost me $1.25 the other day!
 
Like they say acpme, don't get mad, get even.





The powers that be are determined to ruin this country. All we can do is try to make as much money off their larceny for as long as possible.
 
<p><em>It is not just talk that they are diversifying out of the USD.</em></p>

<p>Diversifying out and doing a retalitory dump are too different things. Even with a more diversified economy, damaging ours will have wide range affects.</p>
 
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