The US is a volatile and potentially perilous place for investors in 2020 and beyond.

COVID-19 shocked us into a period of high unemployment, low output, and slow economic activity. In March, the Federal Reserve bank cut already low interest rates to 0, and has since been using the only tool it has left: printing money and buying stuff with it.

The fed announced last month that interest rates will be staying at 0 through 2022, so if the economy doesn't start a miraculous recovery, we're in for more of this:



Is there a way that this doesn't lead to stagflation and/or hyperinflation?

I'm not as doomsday as some -- COVID will pass, Trump won't be in office forever, there's a lot of inertia behind USD as world reserve currency, and Japan isn't busto yet.

On the other hand, being in debt and assuming things will go smoothly is dangerous. What happens if there's another pandemic, war, political/social unrest, etc?


How soon is recession coming? How bad will it be? Where are you parking your money right now?

yep definitely needed a new thread for this

printer go brrr is to offset what would be a terrifying deflationary spiral... stagflation seems inevitable to work through excessive debt loads worldwide

Yes

....

Don't know, humans aren't that good at predicting the future anyway.

It is here already.

Don't know humans aren't that good at predicting the future.

Stocks, bonds, cash.

Bitcorns

Yes, would be terrible for prices to adjust or companies to fail based on supply and demand, best to extend ever cheaper credit to insolvent industries to keep them propped up and make it look like the US is actually a competitive place for business.

Of course the dollar is going to collapse, along with the credit bubble and the lion's share of US industry that only exists because of access to that credit.

does "offset" mean "continue propping the economy up so we can pay at a later date" or do you believe it's possible to avoid calamity all together?

I don't really understand why a deflationary spiral is different than investment realignment. won't it make sense to start investing, spending, and starting businesses again when prices and wages get low enough?

sorry about the new thread, I'm new to BFI. sounds like you're an expert so I'm hoping you can educate me.

I'm not sure about fleeing USD. in the short-term, tell me why I wouldn't hold onto stocks while they're being inflated? too hard time when **** will hit the fan?

won't there be warnings before USD starts losing value? i.e. countries stop buying our bonds.

Stonks, and everything, will continue to go up as printer keeps brrring. At some point the house of cards will collapse. If you feel you have the ability to time it and not get left holding the bag, then by all means continue to hodl

This was a 9.5% GDP drop last 3 months. That was very bad, but it's selective where the punishment is. The recovery has already begun months ago for certain subsets of the economy.

I have cash parked right now but I'm looking for bargains / development deals. There doesn't seem to be any right now since investors where I live are throwing money everywhere.

As of right now, I've never seen a hotter market real estate wise. Prices are exploding in Montreal. Last year I flipped a property for $540,000 and 2 months ago a slightly better property went on the market for $560,000 and sold for $640,000. Bonkers.

sure, I just think it will be years or decades.


Austrians, Libertarians, Taleb etc. are right about fractional reserve banking, the Fed, and perverse incentives of politicians creating an unsustainable and highly leveraged economy. but...

most of the US debt is in fact owed to ourselves in the form of lol social security, pensions, and other stuff.

the question is, do we see USD nosedive before or after internal "economic restructuring" aka cutting our own citizens off from these programs?

edit: Japan is what makes me think that, barring disasters like war or pandemic (which can easily happen), it will be a long time before the world cuts the US off.


let me know if I'm off base here, I'm just throwing my ideas out and would love to hear other opinions.

My vending business is down 85% compared to last year....so for me the recession is here.

How bad will it get? No idea...and everyone claiming they know is just throwing a dart and if they happen to be right it'll be because of dumb luck. Enough idiots making enough idiotic predictions is bound to have someone sort of close....good luck picking that person out ahead of time.

Attempting to answer the theme of your post:

Right now the velocity of money has slowed tremendously due to covid, so the government can get away with printing a ton of money since it's both the supply of money, and the speed of money, which determine inflation.

Will the velocity stay so slow? I can't say for sure, but I bet so. Will they still miss the mark and print too much? I doubt it, but it's possible.

If they massively miss the mark, I'd want bitcoin/gold/silver/guns/food/prepper stuff....I think the odds of that are SUPER low. But if they miss by a bit we can experience some uncomfortable levels of inflation or deflation depending on which way they miss and by how much.

thoughtful post, Rika.

why? is this only dependent on COVID, or other things?

I'm of the opinion that we probably just hit peak new infections, and new deaths will peak soon. combine that with a vaccine likely by early next year and I think we will be mostly back to normal a year from now if not sooner.

good thread. thx for starting it

probably common sense and obvious but i was reading paul krugman recently and he said inflation only occurs with with product or labour shortage. i'd say we nowhere close to either right now.

OTOH, what will be different about 2021, 2022 etc? a vaccine may come, but which one? will it work well? how long to vaccinate everyone, especially when 25% of the population stupidly won't want it?. stories of severe medical glass shortages TODAY.

gonna be a massive amount of money printing and/or homelessness. probably both. not sure labour-intensive, clustering business will come back in next 5 years. think of elevators in buildings. what if you live/work on 60th floor?

this money printing i think is different than credit crisis QE........ in this case, the money gets in the consumers hands. whereas QE i think just lowered interest rates (which certainly helps consumers. but doesn't directly affect velocity)

I don't know how I feel about Krugman or Keynesian economics in general. it examines phenomena happening in the aggregate without exploring underlying mechanisms.

excuse the poker analogy, but imagine you're reviewing someone's Pokertracker database looking for leaks. you see she has a low WWSF (won when saw flop) and you tell her "easy, just decrease VPIP and your WWSF will go up". this will work, but won't fix the underlying problem that she's too passive and over-folding everywhere, and may not make her more +EV.

It seems insufficient and circular to explain away money supply increases with M*V = P*Y (velocity is low, we good!).

post-2008 we didn't have inflation because the money went straight to bank balance sheets. now it's going directly to the people most likely to spend it.

what does Krugman say about how the US makes good on all these expensive gov't programs indefinitely?

most of it is not going directly to the people, the payments are temporary, and they arent significantly more than what they would be bringing in if everyone was working. there isnt much more in peoples pockets and the arent spending it as eagerly so there simply isnt much demand.

30% money supply increase seems like omg a lot but ww2 increased it 3x.

most of this money is going straight into assets (gold, silver, stocks, crypto, housing) where it gets stuck to earn a return and avoid taxes on said return.

if there was a virus or event that shocked construction, agriculture, energy the way this is affecting hotels, restaurants and airlines, there would be big supply side problems and inflation/stagflation would be more of a concern

good points

I mean inflation index’s are incredibly inaccurate... if you exclude oil and energy it would be more accurate but a lot of factors skew the data. Increased liquidity also hides a lot of problems in the short term but who’s to say exactly when it will end and the magnitude of fiscal policies is unprecedented so if your expecting these things to happen tomorrow/next week/next month even probably you are in for a world of pain. Any intelligent person knows these things will have lasting effects but they also know distortions can exist for years if the climate is right.

I don’t know much about the other industries but construction used to get hit hardest by recessions just they got hit later when it was time to collect payment.

What if the treasury printing presses literally stop working and money can't be printed for 1 month???

that would be relative tightening so markets would crash. (probably not if everyone knew it was a 1 month event)

debt markets would cease to function, banks go into crisis mode trying to ensure their business will survive, which means people and small biz cant access debt or roll it over, forbearance ceases, landlords demand rent so they themselves dont go bankrupt. its a tornado...not sure 1 month is enough but going down that road is not an option

basically everyone starts scrambling to avoid bankruptcy, tries to collect on thier loans and wont loan to anyone.

the former, mostly, i.e. kicking the can. though i imagine it might be possible to avoid calamity at the expense of growth

I can't believe one person asked this question and another person took it seriously enough to answer. What is wrong with you?

Look, genuises, life isn't a Hollywood movie where the printing presses stop and the evil genius blocks the money transport trucks with the last of the printed cash. Please get your act together

Cash is injected into the economy by digital deposits, ones and zeros by the Fed. It also buys up bad assets (any number of them), also through digital deposits, and that has the same effect as putting money back into the economy.

Go back and see some of the Obama interviews. He basically exploited the same line of thinking as the two morons above by always saying "We are not going to get out of this mess by printing our way out of it." He was right, nothing was actually printed, it was all done through QE. All those idiots with the Hollywood scenes in their minds felt good about these actions without realizing that we were still doing the same thing.