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Napanee, Ontario | "There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises
I think the issue is timing. The key word in the above quote from Mises is "later". Hard concept to define....
I think most proponents (Peter Schiff, Mike Maloney, Andy Hoffman, Jim Rickards to name a few) the folks who you would consider advocates of the inflationary collapse scenario that the Austrian school of thought proposes - myself included, have been surprised at just how long they've been able to continue pulling rabbits out of hats and kicking the can a little further down the road. I won't go into all the details of how this has been accomplished, but, it has, and continues to be.
Sovereign debts the world over march higher and higher, reaching in many countries (EU, S. A,) already a point of non-serviceability. Yet capital continues to flock into government bonds and similar asset classes with the realization that there is always a buyer of last resort backing these assets. ECB has already made another extension to their now 2 trillion dollar program.
http://www.ft.com/cms/s/0/88d23588-99b6-11e5-987b-d6cdef1b205c.html
It really doesn't look like there is and end in sight planned for the massive expansion in credit. But it will end... the later will come, it's mathematically certain to happen. You can't increase debts indefinitely without a corresponding increase in economic activity. Overproduction in nearly all commodity classes spurned forth from this cheap and easy capital, has been a substantial tailwind for deflationary forces of the past few years.The process of being early in preparation has been humbling, but Mises is correct. There is no avoiding the reckoning.
In real terms, I agree with you that most every asset class will be declining in value. An economic collapse will assuredly mean less real value demanded. But our world is built on a nominal measuring stick, measured in currency conversion ability. Some asset classes will lose far less than others, and while potentially declining in real terms - i.e in volume demanded, the nominal price may present a considerable gain as people try hopelessly to get out of bonds and securities fixed to the value of currency.
EDIT: When? I guess that has been the million dollar question. I thought I knew better in the past, but apparently not...and I've become more resigned to just accepting the what. People might consider that being off on timing is almost as good as being wrong. Perhaps, but I'd rather miss out on some percentage points of ROI than gambling a timed exit, not making it, and being wiped out. To each their own view on that matter I suppose.
Edited by OldMcdonald 1/25/2016 14:06
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Hyperinflation? Or, as this article says . . . ??
