Looks like the delfation boogeyman wasn't much of one after all.

1. 68

   ledefensetechposted 14 years ago

   http://dailyreckoning.com/a-financial-world-gone-mad/
   
   It's getting cheaper and cheaper to live in the US.  Of course all bets are off when the inflation from the massive deficits hit us next year.  So much for the specter of deflation.

   replyreport
   1. 68

      bgamallposted 14 years agoin reply to this

      I don't buy it Led. I suggest you read this and see that rising interest rates is anathema to the Fed. http://socioecohistory.wordpress.com/20 … d-auction/
      
      The threat of deflation from this lack of interest in bonds (high interest rates are deflationary), from the M2M coming on November 15, from the collapse of the commercial real estate market is very real, still.

      replyreport
      1. 68

         ledefensetechposted 14 years agoin reply to this

         It's a two stage thing.  A deflation would help us recover by restoring sanity to the economy.  Unfortunately, the Fed keeps flooding the markets with credit, which unfortunately will cause hyperinflation when the economy tries to recover.  Right now that credit is flowing into a black hole of collapsing asset prices and write offs.  When those debts are written off, we'll start to see inflation or hyperinflation depending on the how much the Fed increases the money supply.

         replyreport
         1. 68

            bgamallposted 14 years agoin reply to this

            I agree but that could be a long long time. Look how long Japan has kept interest rates artificially low. 20 years? In the long run, well.....

            replyreport
            1. 68

               ledefensetechposted 14 years agoin reply to this

               It'll be worse here.  The Japanese have historically had high savings rates, that's why they are stagnant and not contracting.

               replyreport
               1. 68

                  bgamallposted 14 years agoin reply to this

                  While the fed tries to inflate, perhaps even dangerously, the consumer continues not to spend. That and the foreclosure wave on us now are very deflationary.

                  replyreport
                  1. 68

                     ledefensetechposted 14 years agoin reply to this

                     We need a deflation.  Did you see how crazy prices were before the crash?  If the politicians had left things along and not kept certain companies on life support, we'd be on the upswing of the recovery in a few months.  Instead what we're going to see is massive inflation (I'm betting hyperinflation)and more business failures as they start to run out of hoarded cash and no longer have access to credit because all of our banks are going to be insolvent.

                     replyreport
                     1. 68

                        bgamallposted 14 years agoin reply to this

                        You know Led, we need deflation, but rumor has it that the Fed will be looser if Larry Summers takes over. I wonder how much damage will be done if he takes over, unless he snubs the Bank of International Settlements and traditional Fed alliances.

                        replyreport
                        1. 68

                           ledefensetechposted 14 years agoin reply to this

                           We're going to see the destruction of the dollar.  We're seeing price deflation, but do you know where we don't see it?  Gold and oil.  Why do you think that is?  What do investors in gold and oil know that the rest of us don't?

                           replyreport
2. 61

   phonereversetraceposted 14 years ago

   If you believe inflation is going to take place, how do you foresee the government getting all that extra money into people's hands?
   
   If it just sits in banks (like it currently is) because of more stringent lending standards, and the unemployment rate keeps going up (like it will), I don't see how we will have inflation.
   
   Maybe in a few years.

   replyreport
   1. 68

      ledefensetechposted 14 years agoin reply to this

      It isn't about getting money into people's hands.  The very act of making more paper money is what devalues it.  What you're thinking of is the time lag between the printing of the money and it's subsequent loss of value.  Until recently most of that inflation was barely noticeable except over long time frames.  Since 1913 the dollar has lost 95% of its value.  Since we stared major deficit spending, you can expect inflation to go up even more.  Figure it takes about a year from the infusion of new money and credit to be felt in the reduced purchasing power of money.  Buy as much gold as you can over the next year, if you want to have anything of value when inflation hits.

      replyreport
3. 61

   phonereversetraceposted 14 years ago

   The money isn't entering the economy. There is no way there can be inflation if nobody has any money.
   
   No matter how much they print, if it just sits there and does nothing... nothing changes.

   replyreport
   1. 68

      ledefensetechposted 14 years agoin reply to this

      No because you don't take into account the fact that the US sold bonds to fund those bailouts.  We have to not only pay those back at some time (snicker) but also we're on the hook for the interest charged.  So yes, even though the "money" itself isn't being put into circulation, the effects of raising that money will have an inflationary aspect to the situation.  Besides have you looked at the projections for the growth of debt in the US for the next decade?  10 trillion dollars at a minimum will need to be printed or borrowed.  If you don't think we're in for higher inflation, you're nuts.
      
      By the way, don't even look at the CPI.  They don't take into account energy prices and have recently stopped including food prices in their evaluation.  Trusting those numbers is like trusting the unemployment numbers from the Labor Department.
      
      The reason we're not seeing inflation now is two-fold.  First the banks are hoarding their money because they still want to be solvent when the Alt-A ARM's reset starting this fall.  So now we're on the hook for money that's going to be lost in write-offs.  Not a good move.  Second there is always a time delay on the effects of inflation.  The government has been doing so much of it lately I think we'll feel the effects in a year rather than two or three, as we've seen historically.  Don't drink the Kool Aid kids, this stuff really is poison.

      replyreport
4. 61

   phonereversetraceposted 14 years ago

   Here is some pretty undeniable evidence of deflation:
   
   http://economicedge.blogspot.com/2009/0 … dence.html

   replyreport
5. 61

   phonereversetraceposted 14 years ago

   I think we are pretty much on the same page. I just don't see how inflation is possible anytime soon.
   
   Debt is inherently deflationary.
   
   Deflation occurs when the total supply of real and credit dollars contracts. For inflation to be sustainable, incomes must increase to service higher credit (debt) levels, and that is just not going to happen anytime soon.
   
   Oh also, that link goes into a lot more than just the CPI.

   replyreport
6. 68

   ledefensetechposted 14 years ago

   But what you don't realize, I think, is the massive amounts of credit that will have to be produced in order to meet future budget deficits.  It would be funny if the effects wouldn't be so dire, but unemployment is actually keeping us from inflation right now.  The thing is, once things start to recover, you're going to see inflation come roaring in.  I'm almost convinced it will be hyperinflation, rather than just price inflation.

   replyreport