Deflation in China; possible here? What to do.
Posted by John Reed on
China has deflation. I wrote a book on both inflation and deflation. I called deflation depression because Americans do not understand the word deflation.
Are they simply opposites?
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In part, yes. But not completely. In inflation, the purchasing power of the USD falls. In deflation, it rises. The best thing to own in the depression was cash, post office savings accounts, US Treasurys. Those are the WORST things to own in inflation.
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In inflation, it is great to OWE, not own, fixed-rate debt. It goes down in real value. In depression OWING USD-denominated debt crushes you financially.
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US pennies and nickels protect you from BOTH. In inflation, the melt value of those coins rises. In depression, the melt value will fall below the face value but that is irrelevant because face value does not fall. It acts as a stock-market-like stop-loss order.
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In depression, money is hard to come by. In hyperinflation, it is illegal and impossible to come by. That is why the average adult in Venezuela lost 24 pounds during their hyperinflation. And 20% of the population fled the country—all classes of people, not just the poor.
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In general, you need to leave the US in the event of USD hyperinflation. The store shelves here will empty and stay empty. You do NOT need to leave the US in deflation/depression. Depression is also contagious via international banking and international trade. Hyperinflation is not contagious. In the early 1920s during their epic wheelbarrows full of paper marks in Germany hyperinflation, nations across the river from Germany like France and Netherlands had zero hyperinflation. So leaving the US is required by USD hyperinflation, but it likely has no effect in depression/deflation because of the contagion.
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Furthermore, store shelves do not empty in depression. And if you have assets that you can liquidate, you can buy the food, fuel, and medicine you need in the US during deflation as you could in the Great Depression.
Are they simply opposites?
.
In part, yes. But not completely. In inflation, the purchasing power of the USD falls. In deflation, it rises. The best thing to own in the depression was cash, post office savings accounts, US Treasurys. Those are the WORST things to own in inflation.
.
In inflation, it is great to OWE, not own, fixed-rate debt. It goes down in real value. In depression OWING USD-denominated debt crushes you financially.
.
US pennies and nickels protect you from BOTH. In inflation, the melt value of those coins rises. In depression, the melt value will fall below the face value but that is irrelevant because face value does not fall. It acts as a stock-market-like stop-loss order.
.
In depression, money is hard to come by. In hyperinflation, it is illegal and impossible to come by. That is why the average adult in Venezuela lost 24 pounds during their hyperinflation. And 20% of the population fled the country—all classes of people, not just the poor.
.
In general, you need to leave the US in the event of USD hyperinflation. The store shelves here will empty and stay empty. You do NOT need to leave the US in deflation/depression. Depression is also contagious via international banking and international trade. Hyperinflation is not contagious. In the early 1920s during their epic wheelbarrows full of paper marks in Germany hyperinflation, nations across the river from Germany like France and Netherlands had zero hyperinflation. So leaving the US is required by USD hyperinflation, but it likely has no effect in depression/deflation because of the contagion.
.
Furthermore, store shelves do not empty in depression. And if you have assets that you can liquidate, you can buy the food, fuel, and medicine you need in the US during deflation as you could in the Great Depression.
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