In C4L demonstration on campus, need suggestions for talking cost of living/inflation

[BenIsForRon]

So we're going to have a lot of tables, I'm involved with the monetary policy table. The main focus I have is visually and verbally explaining how inflation will affect the average student/young professional's cost of living within the next 1-5 years. Could y'all help me out here? Like direct me to some sources that have projections for this stuff? When I say cost of living I mean things like housing, auto, insurance, health, and food costs.

I'm gonna be looking at places like mises, but any links to articles/analysis would be helpful.

[matthalifax]

here's something to your argument

You need to mention that because of low interest rates and a monstrous increase in money supply there is going to be a huge increase of money in circulation.

Point out that there is going to be more money in circulation chasing the same amount of goods (probably less goods now because it's harder for businesses to get loans and they are decreasing supply because of the deflationary crisis. When inflation hits their not just going to be able to expand again. This is going to have two effects the dollar will decrease in value and prices of goods that are necessities will go up. Because we're in a recession/depression most of this money will be chasing after necessities and since supply for some of those necessities is falling (for example food because farmers are having trouble getting loans. Countries with oil based economies are collapsing so they are going to cut supply to try and save themselves.) the increase of money chasing after these goods will make the prices of the necessities rise. So you can expect to see a rise of prices in all goods that are necessities. Goods that are non-necessities you can expect to see a large decline of prices because of people's spending priorities changing. It'd be a good idea to auction off any non-necessities now if don't think you need them.

If this becomes extreme it could turn into a hyperinflationary depression where the actual value of necessities are rising as the value of the money is decreasing by a large percentage. The only way the government can undo this is my raising interest rates like Paul Vockler did in the 70/80's when there was 13 percent inflation, but if they do that when inflation is bad have terrible ramifications. Imagine how many people would go bankrupt if their interest rates on their loans and mortgages started to increase. So if they keep interest rates low the dollar will crash and if they raise them they crash the economy. We are in a bit of dilemma.

The counter-argument to this is that we are in a deflationary crisis and we can print as much as we want. Not true. The bubble is bursting from the huge amount of leverage, this is good for the economy long term, it's a good thing. The deflationary crisis we are having is taking back the houses from poor people they could never afford and should never have bought. It's giving banks a lesson on risking so much money by lending it out to fools.

This is incredibly good for moral hazard and would do our economy very well for years since banks would be wary for a long time and maybe they'd even stop loaning to people who couldn't afford to pay them back.

What the government is doing right now is stopping the lesson from being learnt, stopping the bubble from being burst. They are trying to keep all those poor people in their houses, but's it's not going to happen because they could never afford it in the first place and never will the only way the government can do it is my stealing away money from the saver's by printing money and giving it to these people who have mortgages they cannot afford.

The government has it's best intentions at heart, and for obama to do nothing and let the markets work is politically unacceptable because his whole 4 years would be incredible pain for everyone and he would get ousted. We would recover much, much quicker though. This is the problem with short term lengths, obama is trying to make 2012 look the best, not america the best in 2020 get it?

The way to college student's to protect themselves is to earn and save as much money as they can right now while the us dollar is worth as much at is and buy assets that are unimpaired by the crisis. The necessities. Agriculture goods, food, things people are still going to buy when they have hardly any money. Gold and silver since we know that's how people will protect themselves from inflation. The highest return you will get for your money is silver and gold coins. Coin's will increase more in value as ordinary people who don't have as much money to invest in bars buy coins. It's very likely there will be a squeeze on coins as production at the mint won't meet demand. Gold and silver coins are probably the best investment a college student could ever make.

Another argument for gold is the fact the only way China can protect it's reserves from the coming global meltdown is gold. See http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aroXowtOihWk

China is one of the world's smallest gold holders with less than 2 percent of their foreign reserves in gold while many countries in Europe have over 50 percent in gold and America has 70 percent. A small increase of 1 percent in China's foreign reserves to gold could double gold.

So in conclusion I would suggest college students, plan ahead. Buy whatever food they can for the future and bulk up now. It will save them a fortune if their prepared to forego divine dinners. Buy silver and gold coins. If you understand the concept of inflation and interest rates you know the best time to sell is just as the government starts to raise interest rates to stop inflation. If their going to invest it should be necessities e.g. food companies, health companies and agriculture companies. An example of something good to invest in as an hedge against food prices rising is the Roger's commodities index (it's a mixture of corn, soybeans, rice etc). If you know your going to be in trouble if food prices start to rise which they already are it would be very smart to invest in something like the Roger's commodities index. Because as food prices rise you'll be paying more at the supermarket but you'll be getting good return for your investment.

This would be my definitive suggestion to college students:

- Invest small amount in gold, silver, and food (rogers commodities index or something similar) You may want just start of with a couple of silver coins and bulking up with some food for the future

- Start figuring out how to buy foods which will last longer, that are cheap and easy to store. Purchase a small amount of them

The first step is getting started. Now what you do is pay attention to the news and as the economy gets worse and worse you slowly increase your investment and food in storage for later. This means your not having to risk much money at the start and you don't have to put much effort into it but your prepared and you can easily increase your investments, hedge scheme.

If your a smart college student you'll be doing your degree in something that's going to be unimpaired by the financial crisis. You'll be working in the necessity sector of the economy not that non-neccesity sector which is going to collapse. Or doing something that'll teach you how to benefit from it.

Earn those dollars while you can now and spend them on real assets. You'll look back in regret if you don't.

Good luck and note the food storage thing is really only for college students who are subsisting who don't have very wealthy parents.

[matthalifax]

benisforron also pm your email, I"ll send you gerald celente's trends forecast for 2009. It'll be a great thing to bring to the discussion since it mentions colleges students and colleges a lot. Gerald celente in my opinion is the best trends forecaster and you'll have a hard time finding someone as on the money as him. So I highly recommend you take me up on my offer.

[BenIsForRon]

Very good post. I can use a lot of that info. One thing I still need is are some estimations for the expected rise in living costs over the next few years. Like what will an apartment in a typical american city would cost in 2011. I know things are way too chaotic to really know, but we do know it will be more expensive. I guess anything with projected interest rate hikes would help.

I'm currently looking to hone my studies the area of agroecology, especially in relation to sustainable agriculture. I can't think of a more stable profession than sustainable food production. I figure, if the economy tanks, I'll know how to grow food without too much outside help. Alternatively, if we somehow come out of this thing without a total collapse, I'll still be in a good spot, as local and organic food is becoming more and more popular every year in the states.

[matthalifax]

yeh you should listen to jim rogers about agriculture he's big on it. Apartment's in a typical city will definitely be a lot less 2011 then they are in real value. They may be more expensive nominal value because of inflation. But if you bought gold now and sold it in 2011 to buy an apartment it would be so much cheaper than now. Remember the second mortgage wave is going to hit late this year, into 2010 and even probably 2011 as the option-arm and altae mortgages reset and 70 percent of the mortgages default. I think you should hire a projector and show the 60 minutes clip 'mortgage meltdown' that will shut up anyone who thinks that economy isn't going to be that bad.
Here it is on youtube http://www.youtube.com/watch?v=w_r-ASDViF8 This will give you some exact figures on the housing crisis.

You may want to show gerald celente's recent appearance on glenn beck which is quite good
http://www.youtube.com/watch?v=SoCv1GwXUxc

and this is probably on of the best videos showing celente's credibility because he forecasted 2008 pretty much on the money in 2007 http://www.youtube.com/watch?v=DqvZwo2qhIo

I personally don't think you'll get any estimations of expected rise in living costs because no-one knows what's going to happen. But obviously main cost's of living are rent, food and oil. Rent should come down but food and oil will go up. The people who are employed are the best off, but if unemployment hits 25 percent, it's those 25 percent that are in big trouble.

As gerald celente says in the depression people weren't wacked off on crystal meth, this world has become a darker place since the depression. More people were self-sufficient back then. There are so many variables it'd be impossible to guess, especially because of government interference.

[hugolp]

If you have time having like a show with the products with their price over the years all next to each other and the the average salary over the year. That way people could see how they are loosing purchasing power through inflation.

Hugo

[KCIndy]

Have you been following what has been happening in Zimbabwe?

From a different thread (Zimbabwe: Gold for Bread) right here on these boards:

http://www.guardian.co.uk/world/video/2009/feb/11/zimbabwe-gold-panning-starvation-food

It's a video clip of people in Zimbabwe mining gold in order to buy bread. The country has been suffering from hyperinflation - the same thing Dr. Paul has warned could happen here if we're not more careful about running up huge national debts and printing money out of thin air.

From the Irish Times:

http://www.irishtimes.com/newspaper/opinion/2009/0128/1232923368816.html

From the Irish Times article:
"This week the central bank started printing Z$10 trillion bank notes just as the price of a loaf of bread reached Z$30 trillion. Two weeks ago it cost Z$30 billion. Hyperinflation has destroyed the economy, leaving most people unemployed and short of food. Millions have fled abroad."

This is the apocalyptic end scenario for a terribly mishandled monetary policy. In the case of Zimbabwe, they had (have) a corrupt dictator who ran the country into the ground. The circumstances here are obviously different... but the effects of hyperinflation are the same in any country.

Do some research about what happened to Germany in the 1920s... or listen to Dr. Ron Paul explain it:

http://www.youtube.com/watch?v=2XkabcSkpOA

Imagine saving all your life, and your 401k finally hits a million bucks....

Then imagine waking up one day and discovering the whole thing can't buy you a loaf of bread.


Of course, it can't happen here....

Can it?? :(