The Carpets are Falling

Back in January I thought I had a foolproof plan to survive the turmoil. I assumed the recession would be inflationary. (to comfort my fiancee I assured her it would be just like the most glamorous moments of the 70's) The only way I could imagine the debtors in this country getting out of trouble was for inflation to take off in such a way that everyone's debts would shrink as they paid them back with inflated dollars.

I had long planned for the two possible recession scenarios. If it was inflationary, I would move into hard assets like real estate and art. If it was deflationary, well I would hide under the mattress with my cash.

I thought I had a foolproof plan, I would buy vintage keyboards, oriental rugs, and some chinese vases. Keyboards to sell to aging yuppies or trust fund hipsters, rugs because they're pretty, and Chinese pottery because at some point the Chinese will want their heritage back (unless they get really good at counterfeiting that too).

I also had a tube of that poisoned Chinese toothpaste which I'd bought in a dollar store in Manhattan and held onto after it made me really sick because I figured lawsuits are good for income in any type of recession.

I was also aware that the Fed was taking an enormous gamble, hoping to create inflation so fast that commodities too became a speculative bubble primed to burst leaving the stimulative effects of easy money without the troubling result of embedded structural inflation.

But now that this gamble paid off better (it seems) than I could have possibly imagined I am faced with a troubling prospect. No one seems to have any money to purchase keyboards.

The prospect of carpet prices falling terrifies me much more than any sort of stock price declines, because if we have truly entered into a deflationary phase, nothing will be glamorous and our debts will become increasingly onerous as we pay them back with our stagnant wages.

The only bright side I can see is that this scenario will keep the bond holders happy which will continue to enable our government to do what it does best, spend its way out of trouble.