Inflation

In these troubled financial times, a radical fix has been offered by the American Federal Bank as a solution, they propose to transfer and pay some Trillions of dollars over to American Trading Banks poised on the threshold of bankruptcy. I’m not sure that throwing so much money at the problem will solve anything, and in my opinion, probably make a bad situation worse in other areas. The American Motor manufacturers big three, Ford, General Motors, and Chrysler, have also lined up too, hoping against hope, that they too can get a similar handout. They are busy also using a form of ‘Black Mail’ by threatening massive job cuts. But one has to question just where do these mind boggling sums of money come from, and where exactly have they been hiding these enormous sums of ready money? Was it in the Countries secret ‘piggy bank’? Or money just waiting for a rainy day and such a National Emergency. Maybe it’s a question no one wants to ask or probe too deeply. I suspect that it’s just another crank of the money machine, instant credit. If this is true it’s a very dangerous fix, this can quickly lead to inflation. An early case of this problem was rampant in Germany before World War two, something everyone now seems to have forgotten. Then, you required a wheel barrow of currency to obtain even a loaf of bread.

 

If that wasn’t enough, we have today another object lesson of just how bad it can get, with the current situation in Zimbabwe. The political move to kick out Ian Smith and his regime, replace them with the black African Mugabe, set in train a political experiment that has now resulted in genocide. No one yet is prepared to make a move to correct this appalling situation, and help their starving populous. Like it or like it not inflation is always on the back burner simmering away, it’s a genie that is always pushing, and waiting to escape from the lamp. Zimbabwe’s inflation rate is now in the Millions per cent. I’m also sure, all Governments have been guilty to some degree of creating a little credit. As an aside, we met Ian Smith on one of our overseas trips, and later corresponded with his partner Maggie Lawton. Circumstances haven’t treated him kindly of late. Recently he broke a leg, then required assistance from his son to farm his property which was under threat of from the land grabbing regime in Zimbabwe. Before any of this could happen, the son died of a heart attack, and his daughter consigned Ian into a Nursing Home in South Africa. It would seem at the same time she despatched his partner. Ian died shortly after.

 

In a more personal note, New Zealand around the end of the World War Two. Five pounds (or ten dollars) a week was a normal wage. The simmering inflation which I said is always around, made a joke out of my initial efforts to provide for my retirement. I had taken out life policies that should have given me a debt free home in 40 years. Long before these policies matured, their combined value disappeared almost completely in a puff of smoke caused by Governments fiddling with our monetary system. I could see I was going to be lucky even to buy a small ‘Chicken House’ with what their current surrender values would realise. So clearly and quickly I had to buy into something that was inflation proofed, and do it soon. I went against all my instincts and training, grabbed the tail of inflation, all on borrowed money, and jumped into land and property. No matter what happened, I figured my personal situation couldn’t get any worse. Did I feel guilty of making a very large sum of money out of ‘Nothing’? No I don’t. Who said that life has to be fair?

 

I have noticed over the years that their are alway plenty of punters who are prepared to take enormous risks with your money. Many of the Housing loans in America as I saw it, were set up to fail. ‘Interest only loans’, together with no deposit, given to all and sundry, meant should the property market take a ‘dive’, and it did, you are in big trouble. It’s nonsense to claim it’s a sign of the times, it is just stupid and bad lending. I feel very sorry for all those thousands locked in to bad loans, all now in danger of loosing their homes. The perpetrators of this mess were possibly well educated and will all hold degrees in higher education and Banking. But in spite of these advantages it would seem they all lacked fundamental common sense. They never read, or took on board the basic rules of good lending that their Granny could have told them.

 

 

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