Friday, October 19, 2012
Inflation and Deflation
The fact is we are experiencing crippling inflation and deflation at the same time.
How can that be?
We are experiencing asset deflation in terms of Housing prices and Wages... (and entertainment gadgets). Not to mention a crippling savings deflation, as real yields are negative in order to help the poor banks maintain record profits.
We are also experiencing a terrible Necessities Inflation in terms of Health Care, Education, Food, Energy and Rents.
Sure, if you listen to the financial press Housing is finally bottoming and maybe turning up. They've been saying that for a few years now. Unfortunately that elusive bottom is fictional according to Robert Shiller, the only Housing Analyst who isn't trying to sell you something. And the horrible numbers are skewed by the fact that the very wealthy are of course still buying very high end real estate. But the middle end is still very much under water.
And nobody disputes the fact that wages have been stagnant for the last 10 years. Except for those who have destroyed the economy like Jack Welsh, and jumped overboard with 100 million dollar golden parachutes.
Housing and wages comprise a vast proportion of Middle Class wealth. And most of the middle class has gone deep into debt to leverage their housing wealth and their wage wealth (through education loans.)
Meanwhile, the Real Necessity Inflation is crushing a depressed middle class.
So, what does that leave? At the high end of the collectibles market the True Wealthy, the 1 percent, is sinking a good percentage of their vast wealth into rare gold coins and medals, historical artifacts, established old (and new) masters art, rare books and documents, and jewels.
The high end collectibles market will no doubt go into hyper inflation as the middle class asset market goes every deeper into deflation.