Commodity prices are going up, the dollar is dropping in value! It might be a good time to file bankruptcy.
November 10, 2010 Leave a comment
(See my update on price rises and its affect on the economy: http://bit.ly/HUNMNJ.)
There has been a lot of talk about possible deflation or a spiraling price drop in the market. This does not seem to be happening as commodity prices are going up across the board.
It started with gold but oil is up as are wheat and corn and milk and meat and just about everything else too. There is an article in today’s LA Times talking about how prices for all commodities are going up, not just oil and gold. Coffee, wheat, sugar, rice, cotton, soybeans, paper, cheese. It’s all going up.
Inflation worries are returning. Bad weather resulting in poor harvests are to blame but so is increasing demand from India and China.
US retailers and sellers of these goods like Wal-Mart and Kraft and General Mills have all announced that they will raise prices soon. Some by as much as 40%. This current situation appears to be highly inflationary and it doesn’t appear to be temporary. I don’t think demand from China and India is going to lessen. In fact it should increase over time driving prices even higher. You should notice this at the grocery store soon. All of your food, gas, an everything you need to buy is getting more expensive. It looks like inflation will take over and not deflation.
The other important thing happening here is that the dollar is dropping. It has dropped more than 12% since June against the other major currencies. According to the LA Times this is because our government wants it to! It appears to be the policy of our government currently. They seem to think that our products will get cheaper so other countries will buy more. But what about the US consumer? How will he or she pay for these higher prices?
This drop in the dollar has caused investors to look for a way to buy something that will hold its value. Investors often look to commodities when faced with this currency devaluation. Investors buy up all of these commodities to preserve their wealth and in doing so they drive up the prices of the everything we consumers need.
This results in huge price increases for the consumer and thus I would argue that this is a foolish policy by the US government that is hurting the american people. Americans are not getting a raise to pay for these increasing prices and in fact many people are unemployed with no prospect of finding a job.
It could also be government policy to encourage inflation as a way to pay back the huge debts with cheaper dollars. Apparently the government is printing more dollars which is inherently inflationary. It could be that the policy is to inflate our way out of these huge debts. This was tried many times most notably under the German Weimar in the 1920s where hyperinflation did not save but actually destroyed the economy. At the end of that mess Hitler came to power.
The reality for you and me in the stores now is that commodities are getting more expensive because it takes more dollars to buy them because of a faulty government policy of currency devaluation.
I would argue therefore it is a good time to file bankruptcy if you have old debts you cannot pay. You may need your money just to buy groceries, supplies, and the other things you need to ride out this recession. Don’t give your money to some creditor for some old debt that went to pay for something you forgot about if you need what little money you have just to survive today and into the future.
I am a bankruptcy attorney practicing bankruptcy law in San Diego CA.