Quote:
Originally Posted by wiseman
When the world is trying to get rid of excess debt, it must destroy money net-net. This is deflation.
Once there is substantial destruction of the value of money like the Dollar losing 60% of its value), there should be some kind of hyper-inflation. But that is NOT inflation the way you understand it.
We will see a reasonable-to-long period of deflation, after which we may see a short period of hyperinflation and drastic revaluation of currencies.
And you guys are saying fundamentally the same thing I am.
When RE prices are going nowhere and stagnating, it is deflationary with respect to time value of money. And that seems to be the general opinion in this thread.
cheers
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Dear wiseman,
Can you please guide us on how to manage cash better during these times?
Though my liquid/debt investments have been giving better returns than I would have got in any other assets, I have some very basic concerns during this period of uncertainity.Looks many here share the same concern too.
Let me try and explain.Deflation I feel doesnt always result in price coming down and better affordabality.Especially when it also results in shortage in supply/volume.It could result in people who have more wealth and money fight with each other for the limited resources pushing the price even higher.
In India, Business dont generally cater to the masses - i.e. low profit mass volume but its increasingly becoming high profit low volume.The corporates are not obliged to provide value for money and concentrate only where they can profit more.It has become only the responsibility of the government to announce freebies, provide subsidy, take care of have-nots.It works for the government/political parties as such announcement are populist and they also recieve kick-backs from corporates.
Ths issue now is, whether to choose the devil or the deep blue sea.I choose to believe the government as they are the known devil and think, thanks to their policy and past history we will become increasingly poor and keep expecting them to provide for us and we inturn vote for them.
Unless rupee appreciates considerably or governments policy shifts towards domestic production/consumption, I feel with global deflationary effect destroying value of money, It will not only ensure pressure on jobs and salary but also deprive the middle class from what they are able to afford currently.I am not talking about borrowed money, but what we can buy now using cash from hard-earned savings.
I have started to believe and prepare myself to face stagflation for India.I feel it is more or less the same preparing for deflation now and hyperinflation later, only difference I now carry my umbrella in case my house leaks eroding value of my cash and threaten to drench me and flood my livelihood.
Request you to kindly put things in perspective for me and advise.Thanks very much in advance.