I catch up with Harry Dent ahead of our virtual seminar next week. We discussed property and gold among other things. What is his prognosis? How might we prepare? This is not specific financial advice, just a general conversation.
Harry Dent, Robert Kiyosaki and I will all be participating in an online forum on 24th May 2020. Details here: http://harrydentlive.com/
DFA has no commercial relationship with either Robert or Harry. But at this time, this is an important conversation.
– Dent makes here the usual mistake A LOT OF people make. Even hardcore Deflationistas & Inflationistas make this mistake. I propably can count the number of people who “get it” on the fingers of one hand.
– Falling interest rates are NOT Deflationary but Inflationary instead. Because when rates fall by 50% then people who have debt can afford to double their debt (= (debt) inflation) and still pay the same amount of interest.
– Rising interest is actually very DEFLATIONARY. Because when rates e.g. double A LOT OF companies/households will be forced to dedicate more of their income to servicing their debts. Then A LOT OF debtors (more) will default on their debts (= Deflation).
– Price Inflation (= rising prices) is required to get Credit/Debt Inflation. And falling prices are required to get (credit/debt) deflation. A good example is (australian) iron ore. I assume that companies like Rio Tinto & BHP can make a big profit and are able to comfortably service their debts when iron ore is at US$ 200. Guess what happens when/if iron ore drops to US$ 10 or US$ 20. I assume that then those 2 companies will start “bleeding red ink” and will go “belly up” when this situation continues for too long. Then all their debts will have to be written off (= Deflation).