Hyperinflation or just plain old inflation - Agri-Business - HayTalk - Hay & Forage Community

Jump to content




Photo

Hyperinflation or just plain old inflation


  • Please log in to reply
17 replies to this topic

#1 stack em up

stack em up

    They say you’re a man of vision....

  • Members
  • 2979 posts
  • LocationWatonwan County MN

Posted 20 October 2020 - 09:26 PM

With the first coronavirus checks everyone got, as well as CFAP 1 and 2, and now talk of another 2 trillion dollar stimulus, where will all this lead us? I’ve heard a bit of talk that all this spending will lead to inflation or it’s ugly sister hyperinflation . It makes sense to me. The question I have is how long before we see the interest rates climb? I was born in ‘82 so I remember the 80s farm crisis from the eyes of a little kid. Didn’t have money for this or for that but we always made do. Dad can’t recall when the interest rates started climbing but he remembers paying 20% on the operating note. I’m doing everything I can to keep as many pennies as I can in my pocket. Just looking for others thoughts.

#2 Gearclash

Gearclash

    Hay Master (Supposedly)

  • Members
  • 3340 posts
  • LocationSioux County, NWIA

Posted 21 October 2020 - 12:19 AM

I know I have been wondering the same thing about inflation.  I think the key to whether or not we see inflation and how much is going to depend on money velocity.  If money is not moving around quickly in the economy, it is kind of the same as having less money in the economy.  I think the reason that the government dumped such a massive amount of money into the economy this year is that they foresaw a drastic drop in money velocity, for a wide variety of reasons.  

 

I would define hyperinflation as being a loss of confidence in a currency; in other words, the currency is not so much being devalued by an excessive supply as that nobody wants to own the currency any more. So long as the US is a stable country I don’t see that happening.  How long that can last I don’t know.  

 

Regarding interest rates, who knows?  My thought is that we are not very likely to see the high rates that occurred in the 80s.  I think our economy has gotten too used to low cost loans to function at a higher interest rate.

_________

 

Just a couple thoughts I have about money and monetary policy.

 

1) A successful business requires capital (money) and entrepreneurial ability.  Lack of either will eventually be fatal to the business.  My thought is the economy will be most vibrant when those to needs are as closely matched as possible.

 

2) The money supply required for an economy to function as time progresses can be compared (poorly) to an internal combustion engine.  Money is like the oil in an engine.  It is not the source of power output per se, but is vital to maintaining power output.  Too much in the crankcase is harmful, as is too little.  A normal economy is like an engine that adds cylinders every year.  It is therefore necessary to add oil capacity to that engine to avoid problems due to lack of oil.  



#3 r82230

r82230

    Hay Master

  • Members
  • 3750 posts
  • LocationThumb of Michigan

Posted 21 October 2020 - 07:13 AM

Couple of things have happened since the Peanut Farmer's era. Up until then the Fed (Federal Reserve) didn't fine tune the money supply.  Better known as the M1 and M2 (measures of money in circulation and in banks).  Think off a faucet of hot and cold water.  They only turned one on or off wide open at a time, so you either ended up with too hot or too cold water.  Now, they slowly adjust both faucets (interest rates/printing money) to try to keep the temperature the same or slowly change the tempature.
 
The US economy GDP (Gross Domestic Product), is around 2/3 spent on services (we are 'consumers' mostly).  The stimulus package was to spur the spending (which it seems to have did).  Problem was, there were a lot of services closed or reduced in capacity (restaurants, travel, hotels, etc.).  I know in my case, I use to take the better half out to eat at a non-fast food restaurant  3-5 times a week, or more.  Not that I needed to, but just did.  Now, since early March, I been out to a sit down restaurant once (last weekend).  I also know our grocery bill is higher. 

 

I think I read somewhere about 40% of consumer spending from hotels, restaurants, travel, etc. was re-directed to TVs, home appliances, home improvements.  Which in turn helped create a 'shortage' in those sectors.   I just can't put my hands on that source of info right now.

 

Here's an interesting chart in this article about where the stimulus money was spent by income brackets.

https://www.economis...timulus-cheques

 

Too much was 'saved' or used to pay down debt.  Remember the government wanted it spent, we are consumers after all.   As Gear mentioned money velocity is important.

 

As far as interest rates, who has a crystal ball?  We gone through more than a decade of low interest rates that has never happened before, so it's hard to gauge using history.   I personally am in the process of refinancing, locking in interest rates for 10 years.  Sooner or later interest rates will go up (they can't get much lower than 0% that the Fed is flirting with today IMHO).   

 

Unfortunately, I also had the fine opportunity to experience of double digit interest rates in the early 80's under my belt as an 'experience', that I have not forgotten.  First home mortgage was at 11.5%, farm operating loan was a variable (never again experience too :o ), started at 8.5%, got up to 13.5%.  :(

 

Larry


  • JD3430 likes this

#4 r82230

r82230

    Hay Master

  • Members
  • 3750 posts
  • LocationThumb of Michigan

Posted 21 October 2020 - 10:34 AM

Stack,

 

The attached are a couple of things that came across my desk, thought I upload for your reading pleasure.

 

Larry

Attached Files


  • stack em up likes this

#5 rjmoses

rjmoses

    Hay Master

  • Members
  • 4899 posts
  • LocationNear St Louis

Posted 21 October 2020 - 02:45 PM

Inflation ran rampant when Nixon floated the dollar.

 

Expect inflation to run rampant anytime soon because that cures the Social Security deficit and government debt problems.    If appropriate, borrow money now, pay it back with ultra cheap dollars. 

 

Ralph


  • endrow and JD3430 like this

#6 Ray 54

Ray 54

    Advanced Member

  • Members
  • 346 posts
  • LocationPaso Robles Ca

Posted 24 October 2020 - 03:19 PM

Just don't sell the farm and think you can live 10 to 20 years on the nest egg you just put away. Of course you could have the crystal ball that will show the ins and outs of the stock market. ;) But I would not bet on it.



#7 rjmoses

rjmoses

    Hay Master

  • Members
  • 4899 posts
  • LocationNear St Louis

Posted 25 October 2020 - 07:37 PM

IMO, the best "investment" for hyper-inflation would be land.

 

Just thinking.....

 

Ralph



#8 r82230

r82230

    Hay Master

  • Members
  • 3750 posts
  • LocationThumb of Michigan

Posted 26 October 2020 - 08:33 AM

IMO, the best "investment" for hyper-inflation would be land.

 

Just thinking.....

 

Ralph

 

The biggest obstacle with land IMHO, is the darn yearly property taxes (what I call rent to the government).   You have to pay whether you sell property for a gain or not.  Well I guess you could not pay them and just loose the property later.  :huh:  And we won't talk about the cost of insurance (you could go naked on this, I suppose).

 

Larry


  • JD3430 likes this

#9 Gearclash

Gearclash

    Hay Master (Supposedly)

  • Members
  • 3340 posts
  • LocationSioux County, NWIA

Posted 26 October 2020 - 10:43 PM

IMO, the best "investment" for hyper-inflation would be land.

 

Just thinking.....

 

Ralph

Ask Nebraskan farmland owners how that is working out . . . 



#10 r82230

r82230

    Hay Master

  • Members
  • 3750 posts
  • LocationThumb of Michigan

Posted 27 October 2020 - 07:19 AM

Ask Nebraskan farmland owners how that is working out . . . 

 

That's one of the areas i was thinking of, seems Lincoln & Omaha got the farm land owners (farmers) by the throat.  Will be choking the 'cash cow' to death even.  Looks like Chicago might not be far behind.  ;)

 

Larry 



#11 Gearclash

Gearclash

    Hay Master (Supposedly)

  • Members
  • 3340 posts
  • LocationSioux County, NWIA

Posted 27 October 2020 - 04:11 PM

Nebraska has a unicameral legislature so there is no Senate to help even out the rural lack of representation.  



#12 stack em up

stack em up

    They say you’re a man of vision....

  • Members
  • 2979 posts
  • LocationWatonwan County MN

Posted 18 November 2020 - 09:24 PM

So what’s the deal with Nebraska farmland? Haven’t spent much time reading anything other than soil sample reports and watching the futures markets.

Read somewhere just today that market analysts see the dollar dropping as much as 20% in the next year. That’s great for commodities in my opinion. Oil futures being sub-zero due to the little tiff OPEC and Russia are having, should be a great year for farming. Famous last words I know.

#13 Gearclash

Gearclash

    Hay Master (Supposedly)

  • Members
  • 3340 posts
  • LocationSioux County, NWIA

Posted 20 November 2020 - 11:10 PM

So what’s the deal with Nebraska farmland? Haven’t spent much time reading anything other than soil sample reports and watching the futures markets.

Read somewhere just today that market analysts see the dollar dropping as much as 20% in the next year. That’s great for commodities in my opinion. Oil futures being sub-zero due to the little tiff OPEC and Russia are having, should be a great year for farming. Famous last words I know.

Real estate taxes are so high that in some places the amount of tax paid  per acre is very near what the land rents out for.  



#14 JD3430

JD3430

    "Trump deplorable"

  • Members
  • 10898 posts
  • LocationPA/DE border

Posted 21 November 2020 - 08:01 AM

I have been a firm believer in owning gold as part of both my investments and retirement. My parents were depression survivors and big into owning gold. 
The rumblings I’m hearing about the “digitization of the dollar” has me pretty concerned as I have set aside cash to fund college. It kind of reminds me of the 1934 government buyback of gold. 
Is the government planning on “buying” all our paper cash and converting it to digital currency? 
How much wealth will be lost by the average American? 



#15 rjmoses

rjmoses

    Hay Master

  • Members
  • 4899 posts
  • LocationNear St Louis

Posted 21 November 2020 - 05:36 PM

I'm trying to think of ways to prepare for the future.  E.g., I'm seeing equipment and parts shortages at the JD and NH dealers,  JD isn't expecting any new tractors until June at the earliest.  NH is having trouble getting parts for my tractor.

 

So, I'm asking myself how to prepare for Biden's Dark Winter--which I take to mean things are going to get pretty ugly.  And I expect it to get ugly regardless of who gets elected.

 

I tell people I think we are at war--WW3--but half of the US isn't smart enough or willing to recognize it.  It is an information/propaganda war aimed at world domination with fear and safety as the primary weapons.  

 

It doesn't surprise me that ammunition is in short supply since the components, brass, primer's, etc. are made in China.

 

I was considering trading my oldest tractor in on a new until I found out the model I was interested in was built in Turkey.  I don't think that's a good idea.

 

I'm flip-flopping between hyper-inflation, stagflation, food and energy shortages, etc.,  My crystal ball shows a storm, but it doesn't say if it's a tornado, hurricane, blizzard, drought, tsunami, or what..

 

These are a few of my thoughts, but the future doesn't feel too good.  So, I'm rethinking my plans, preparing for the worst, but hoping for the best.

 

Ralph



#16 stack em up

stack em up

    They say you’re a man of vision....

  • Members
  • 2979 posts
  • LocationWatonwan County MN

Posted 21 November 2020 - 07:15 PM

As far as preparing for the future, I had the diesel barrels filled yesterday, $1.54 for 2000 gallons

Owning gold seems like a pretty good idea as an insurance policy. I get mine from Fat Tony in the back of Italiano Ristorante. Gives me a hell of a deal
  • rjmoses and r82230 like this

#17 JD3430

JD3430

    "Trump deplorable"

  • Members
  • 10898 posts
  • LocationPA/DE border

Posted 21 November 2020 - 09:31 PM

If we look over the 15 years from 2005 to 2020, the price of gold has increased by 330%. Over the same period, the DJIA increased by only 153%.

 

In terms of preparation, I think we all need to prepare for shocking increases in fuel costs. 
Also might expect that some kind of emissions or carbon taxes to be deployed.  Might be added to fuel tax, or a penalty of some kind for older machinery or all machinery in general. Will AG be exempted? Who knows. I’m sure the teachers union will get every break under the sun. 


  • rjmoses likes this

#18 stack em up

stack em up

    They say you’re a man of vision....

  • Members
  • 2979 posts
  • LocationWatonwan County MN

Posted Yesterday, 07:22 AM

If we look over the 15 years from 2005 to 2020, the price of gold has increased by 330%. [/size]Over the same period, the DJIA increased by only 153%.[/size]
 
In terms of preparation, I think we all need to prepare for shocking increases in fuel costs. 
Also might expect that some kind of emissions or carbon taxes to be deployed.  Might be added to fuel tax, or a penalty of some kind for older machinery or all machinery in general. Will AG be exempted? Who knows. I’m sure the teachers union will get every break under the sun.


If you’re concerned about it, better buy some fuel barrels.
  • endrow likes this




0 user(s) are reading this topic

0 members, 0 guests, 0 anonymous users

× Sponsors