In Monday’s RANT, “GERALD CELENTE, PATRIOT,”I wrote of my recent experience renewing the leases of my family’s cars, in both cases at prices roughly 10% lower than the previous leases, signed in February 2008 and May 2009, respectively. Based on discussions with the dealers – particularly mine, as it was the same salesman as I dealt with three years ago – the reason for such declines was principally the weak economy. Plus – as I noted this weekend – “Government Motors” has ramped up production so high, it is experiencing RECORD DEALER INVENTORIES, thus pressuring new car prices.
In response to this commentary, David Schectman wrote the following in his Tuesday newsletter:
Andy presents a valid viewpoint, but it is also possible that the fall in prices he refers to is the result of deflation – at least that is a position Richard Russell has hammered on for several years. Yes, it is possible to have deflation of prices but inflation due to currency debasement. In fact, Jim Sinclair preaches that the inflation we will shortly have to live with will not be the “typical” demand-driven version, but rather currency induced form of inflation, caused by the Fed’s QE-to-infinity policy. That said, there is little to be excited about in the economy, as witnessed in John Williams’ latest release.
Which brings me to the point of today’s RANT, “WANT VERSUS NEED.” For as long as I can remember, the term “inflation” has been butchered beyond recognition. Even amongst the PM “shadow world,” few understand price inflation is the symptom, and MONEY PRINTING the cause. After all, the definition of “inflation” is the rate of change of the money supply, NOT the general price level of goods and services. The fact the government lies about both the money supply and price levels is beside the point, the key being that the latter MUST eventually rise in response to growth of the former.
However, even in the extreme case of HYPERINFLATION, price level changes are difficult to forecast. They are NEVER uniform, and in today’s corrupt, centrally-planned world, are influenced as much by government manipulation as supply and demand. However, the rule of thumb I have espoused for years CANNOT, and WILL NOT be denied by intervention – i.e., items we NEED will inflate the most, and items we WANT the least, in many cases actually deflating.
If we actually experience HYPERINFLATION, everything will rise in price. However, only items we NEED will rise in real terms, with items we WANT falling in by this measure, in many cases precipitously. Moreover – as noted in my recent commentaries about Weimar Germany – even the almighty stock market fell sharply in real terms. Actually, I believe a small handful of resource equities rose dramatically, while the great majority rose weakly at best, with the majority of companies going BANKRUPT due to the horrific ramifications of hyperinflation.
Still larger than misnomers regarding the definition – and causes of – “inflation,” is the public’s broad misunderstanding of what we “NEED” and “WANT.” Much of this fallacious thinking is due to government BRAINWASHING – such as the concept of “The American Dream,” promoting home ownership, two cars, and a college education for all. However, NONE of those “big three” concepts are actually NEEDS, at least not in the manner prescribed by such PROPAGANDA.
Yes, one needs “shelter,” but home ownership is decidedly a “WANT,” not a “NEED.” The great majority of the world’s population does not own a home, instead RENTING to obtain shelter. Plus, I might add, if you have a MORTGAGE, you don’t “own” anything – the bank does! And I won’t even go into the fact that 45% of ALL U.S. mortgages are “underwater,” making it impossible to even brainwash YOURSELF into believing you “own” anything.
Next up, automobiles: Yes, everyone NEEDS “transportation,” but in most cases, transportation can be obtained via mass transit. And for those that do require a car – which in America constitutes the majority – there is no NEED to own a new car, as there are plenty of used cars to choose from. It may be less prestigious – and fun – but the fact remains, demand for used cars is much stronger than new cars, as is demand for home rentals compared to purchases.
As for EDUCATION, the “need” for a college degree might be the greatest of all American fallacies. In my view, “college” was a PRIVILEGE afforded by the strong U.S. dollar of the 1950s through the 1980s. America was such a powerful nation – in all facets – with such a high standard of living and low debt load, its citizens could afford to pass four valuable years of their lives partying in college, paying big money for a curriculum that typically consisted of at least 75% “filler,” and for many 100%.
INFLATION was much lower then – making college more affordable – while citizens’ debt loads were much lower and real wages much higher, making it easier to take on significant student loans. Moreover, U.S. EMPLOYMENT experienced secular growth throughout this period, guaranteeing jobs for the majority of college graduates, regardless of their skill level and/or academic performance.
Unfortunately, ALL of these trends have permanently reversed, making the “benefits” of a college education difficult to discern, while the “costs” for most have become prohibitive. In other words, what people NEED is job training, intelligence, and motivation – plus a little luck – but what they WANT is a college degree. And if what I just said isn’t enough to strike a chord, I have NO DOUBT your views will be forever changed after watching the NIA’s brilliant 2011 documentary, “College Conspiracy.”
To conclude, be very wary of how you view the term “inflation,” and don’t for a second believe it implies EVERYTHING will rise in price, certainly not in real terms. The only assets you want to OWN during periods of rising inflation are those that will increase in real terms, of which only items people NEED will fit that description (PHYSICAL GOLD and SILVER, FOOD, ENERGY, and other ITEMS OF REAL VALUE). However, items that you WANT – but do not NEED – are GUARANTEED to lose value in real terms, and likely in nominal terms as well.
PROTECT YOURSELF, and do it NOW!