Fire Sale Ahead

Janszen at iTulip.com is always on target. His latest post, focusing on the latest rate cut insanity and the Fed’s likely next steps is no exception and a a powerful must-read.

Early in the article, he focuses on the potential short-term benefit to consumers being huge discounts. But he also lays out some prophetic advice:

Advice to readers: take advantage of the early 2009 Great American Fire Sale and go out and buy all the generators, chain saws, washing machines, fine linens, and other durable goods you’re going to need for the next few years because by the end of 2009 most of the inventory may be sold through, many retailers will be shut down, and replenishment of stocks of the survivors will likely be meager; our models say that the goods import supply will decline more precipitously than the supply of money available to pay for them. That spells severe stagflation. 

But elsewhere he suggests that consumers would better save their limited funds to prepare for the coming disaster than to spend them. But isn’t that contrary? Besides the obvious need for cash on hand to pay the increasing bills, isn’t the cash going to be worth less once the temporary, bankruptcy-driven deflation passes and the monetary policy-driven inflation kicks in?