If you’re a small nation with massive natural resources, and you owe me a lot of money denominated in my currency …

Is the US in a deflationary spiral? Absolutely!!! Will the US fall into a depression? Not likely actually, and you can thank the global economy for that. The global players like GE, and McDonalds will keep things going in America.

How would I invest? I don’t like commodities, not because I don’t commodities but current investing techniques are actually bad. Current commodity ETF’s invest in futures and you are stuck with the future contract rollover issue. Thus you will loose money even if the contract goes up slightly.

My approach has been to focus on global economic players. I bought into Ford, GE, MDR, etc. These are global players that will benefit from the global economy. I as a rule DO NOT invest in any local player regardless of where they are registered (US, Canada or Europe).

This is why I do believe so long as there is more consumption, inflation will have a hard tie since in the west there will be a lack of ability to pay for the higher prices. A sort of buffer against inflation will be created where the west will slow things down.

The US is in a deflationary spiral at the moment (see comment #1). Wages will not rise and much more likely fall. As a credit-based economy with a serious trade deficit, we will unfortunately not see our prices decline at the same rate. Factor in the decline of the US dollar as the reserve currency of choice, and the US is going to get squeezed HARD.

The problem I’m having is where to put my money. I’m thinking about just buying commodities on dips for the rest of the year.

Am I missing anything?

this is another good point…

I don’t believe the consumption of goods will remain constant. In fact I believe that the consumption of goods will increase, if you can get other countries to consume. But to get them to consume you need them to spend and soak up the dollars that they need. For that to happen you need traders to move out of currencies and into commodities. And that has happened quite effectively. The result is that those commodity based countries will get the excess currencies and spend them. This in turn will result in jobs for the west because there will be increased trade.

China has been loading up on commodities recently. They are also in talks with many other foreign nations about accepting each other’s currency (just another factor in the “USD being dethroned as the world reserve” argument). So I agree that commodity producing nations will begin to see exports rise substantially and as commodities rise, wealth will increase. What I wonder though is where and how is that money going to be spent.

Imagine for the moment that you reduce the money supply and the velocity.

In the US, there is a decrease in the total Money(+Credit) Supply. Despite Ben’s attempts at staving off deflation, printing press output has been a pittance in comparison to the amount of credit that has been destroyed.

Furthermore, velocity has also come to a halt with regards to new monies injected into the banks as they have no one to lend to (tighter restrictions + less ppl looking to borrow + defaults continuing when considering the correlation to jobs).

We are tipping towards Depression (despite efforts by Barak and Bernanke). The US central bank (FED) does not have control of the situation.

“So I am not arguing for uncontrolled debt. I am arguing for controlled managed debt.”

This ^^^ is the distinction I was looking for in the older post where you bashed Schiff and Taleb but was unable to find it.