Tough Business Decisionss: Inflation or Recesion

It seems like the news is the same as it was a month ago, only closer.  The dollar is still in horrible shape, the price of a barrel of oil can’t seem to stop going up, and people are still defaulting on their mortgages.

The big problem is that all of these factors seem to be worse now.  First of all, the dollar continues to descend against the Euro.  What that tells me is that people who have large sums of money to move think that the US economy is in for some rough times. When your currency goes from under one dollar per euro to over 1.40 per euro in five years, you are in a bit of trouble.  If the euro is already suffering from inflation in the 2% range, the loss of value in the dollar must be much larger.

The price of oil continues to move up.  The simplest  solution is to nuke China to reduce their demand for foreign resources.  The problem is the side effects-  Billions of humans dead.  The economic growth in China continues to be staggering.  The Chinese tend to have an interesting business strategy.  Work your butt of and save.  Even in a country that uses a poor primary business model (communism), the work hard and save strategy seems to work.  They are getting sick of saving and want to buy a piece of the good life.  That includes things that require oil either as a fuel or a feedstock.  Oil hit $92.22 during trading last weak.  The extra production capabilities of OPEC and other such countries seem to have nearly run out.

Last of all, more and more people are defaulting on their mortgages.  The companies involved in real estate are getting clobbered, according to a recent story.  These companies represented a huge part of the boom that helped us recover from 9/11.   Their support in the economy will be missed.

It’s time to tighten our belts.  In a world of ups and downs, the economy is due for a down.  People that have planned a little will do just fine, just like they have always done.  You just have to ask yourself where you are.  If there is a coming depression, how will that work out for you?  If there is high inflation?  I feel like stocks offer some nice benefits.  They go up with inflation over the long term.  If you buy boring high quality stocks, they will weather a recession.  Real estate can have the same benefits.  It holds its value, and you get a good deal on a rentable property, it can also provide some benefits.  Cash does well in one and gets slaughtered in the other, and debt does the opposite.  There is also a chance we could have both.  I hope that things go along well for the next while at least.  Hopefully till I and all my descendants are  dead.  But I am not counting on it.

The question is will the Fed choosing inflation over recession.  One kind of sucks and reduces what the true government debt is, the other one sucks worse and reduces the governments ability to pay off debt.  Tricky.


2 Responses to “Tough Business Decisionss: Inflation or Recesion”

  1. 1 rhill October 30, 2007 at 8:48 pm

    I’ve been saying this for 2 years now. The sad thing is that we are in the minority and everyone else continues living as they always have.

    That’s another reason why I’ve stopped so often lately to really appreciate a good night’s rest (particularly in an air conditioned house), a good meal, and safety.

    I’d also like to think that God will spare the United States but how can he, as we look around at what the US has become. One interesting opinion is in these two links:

  2. 2 rhill October 30, 2007 at 8:52 pm

    I’ve been saying this for two years now. The sad thing is that we are the minority and everyone else continues living as if nothing is going on.

    I would like to think that God will spare the US but I know that that can’t be true. We are a wicked nation. Here’s a couple of links that talk more on that subject:

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: