A Tidbit from Dave Rosenberg on Inflation

Illum · Jun 19, 2009

Quote from Eight:

My question remains unapproached by anybody on ET.. could inflation hit so suddenly that the FED could not reduce liquidity fast enough to forestall a runaway by the dollar?

Judging by their recent history, I would say it is almost guaranteed they wouldn't see it coming until it was too late.

Thalamus09 · Jun 19, 2009

Quote from peilthetraveler:

Way to go! Compare us to a nation with lots of manufacturing and also to ourselves back when we were a manufacturing nation and on the gold standard at the same time. Its comparing horseshoes and hand grenades....Both are made of metal, you can throw both of them about the same distance, but just because the horseshoe didnt blow up doesnt mean the hand grenade wont.

America still is the biggest manufacturer in the world...just more efficient.

http://www.plantengineering.com/art...etroit_U_S_manufacturing_shows_its_muscle.php

...Analysts quoted by Reuters said while manufacturing as a percentage of GDP is down, as is overall employment in the sector, the efficiencies of U.S. manufacturing are still formidable.

"That contraction is progress," said James Schrager, a professor at the University of Chicago Booth School of Business. "We have a larger output of goods and services than ever and we have a smaller number of workers doing it."

"The U.S. still manufacturers more than any other country in the world," said Tom Murphy of RSM McGladrey. "We're just making different things than we made in the past and we're making them differently. That's not going away just because of what's happened in the automotive industry."

Debaser82 · Jun 19, 2009

Quote from Thalamus09:

America still is the biggest manufacturer in the world...just more efficient.

http://www.plantengineering.com/art...etroit_U_S_manufacturing_shows_its_muscle.php

...Analysts quoted by Reuters said while manufacturing as a percentage of GDP is down, as is overall employment in the sector, the efficiencies of U.S. manufacturing are still formidable.

"That contraction is progress," said James Schrager, a professor at the University of Chicago Booth School of Business. "We have a larger output of goods and services than ever and we have a smaller number of workers doing it."

"The U.S. still manufacturers more than any other country in the world," said Tom Murphy of RSM McGladrey. "We're just making different things than we made in the past and we're making them differently. That's not going away just because of what's happened in the automotive industry."

That's only true cause europe isnt considered as a country on it's own.

Martinghoul · Jun 19, 2009

Quote from PragmaticIdeals:

Asset price inflation will inevitably trickle into consumer markets.

And if only a small portion of it does (because it's being countered by deflationary forces), this is arguably WORSE because it means "main street" has lost jobs and purchasing power whereas capital-owners have boosted their REAL wealth (due to the printing press and not "hard work" -- technically due to failing in the free market).

Often times, we economists attempt to rationalize silly policies like printing money with a range of theories.

These theories have merit at the proximate level. Proximate being the key word. On a macro / systemic level, these types of policies will likely only aggravate matters and inequity.

You can't just print money (or increase the M2/M3/whatever supply) and think that it will improve the real conditions of the average (but especially lower class) American.

Never mind the foreign nations which credit the US which are obviously big losers every time a dollar is printed regardless of whether inflation occurs or not. Again, this is a proximate "win" for the US, but as we have seen, the foreign credit will rapidly dry up with these policies and/or the US dollar will lose its status as a reserve currency (China is already spending more on commodities and entering into bilateral trade agreements with other nations WITHOUT the dollar).

Call it the butterfly effect.

Well, I am not sure I would completely agree with you there, PI...

It's all about the timing. I agree that 'eventually' asset price inflation will, in fact, filter through to CPI. However, it's certainly not going to happen now or at any time very soon. I am quite sure of that given the state of the money mkts (the manifestation of the deflationary forces). So what we have then is dangerously strong deflationary trends in the short run, which can only be countered by methods that inevitably introduce inflation some time down the road.

So the Fed is in fact walking a tightrope and is risking quite a debacle down the road. The potential for a very serious policy mistake is there, for sure. However, I don't think doing nothing is an option. Their argument is that they will fight the inflation battle when that time is upon them. Until that happens, there are other, more immediate dangers.

I like this blurb about the Fed's policy dilemmas:
http://www.ritholtz.com/blog/2009/06/can-the-fed-execute-a-perfect-landing/

zdreg · Jun 25, 2009

Quote from bozwood:

I am no real fan of many of the generations that followed the WWII generation. That said, I get tired of hearing this stuff. Do you really think Americans now would not fight the same way as those Americans did if faced with an equal threat? I absolutely believe they would. Circumstances such as this would "make the man" in my opinion. [/QUOTE

]the record of the greatest generation speaks for itself.

america has grown soft . skilled well paying jobs inc. experienced welders are going begging for candidates. education below the graduate level is a joke by international standards. these are not the kind of men u want in the foxhole.

lrm21 · Jun 25, 2009

Quote from Kassz007:

In order for inflation to kick in, the increased money supply has to CIRCULATE throughout the economy. Only time will tell how quickly this will happen. I don't think it's realistic to expect the stimulus package and fed funds to be circulating throughout the economy this quickly. My personal expectation is we start seeing inflation creep up in mid to late Q3. I don't see hyperinflation as I believe the fed will be able to control it when the time comes, and I don't even necessarily see the ideal 2% inflation in Q3. I don't expect deflation, but it will all depend on how quickly the increased money supply circulates throughout the economy.

seven days later why not kick in my 2 dollars (inflation)

I go with the Von mises definition. Inflation is the expansion of the money supply.

CPI is the wrong tool to measure inflation. Didn't you guys learn when the CPI was reporting 2% and houses were moving 15%

The CPI is bullshit propganda

money supply expansion is inflationary period.

it doesn't matter if your milk is still 2.00 because the egghead will never know where the market decides to stick the excess capital until it's too fuckin late

Goldman record bonuses that's not a sign for you.

When money is printed those closest to the point of creation benfit the farther removed the more likely you will lose and be the last too know

it's amazing tha after hundreds of years people still buy the bullshit line that printng money is not inflationary

Landis82 · Jun 26, 2009

Quote from makloda:

At the time the S&P was right at 900, a few months from the 2003 rally that would take it up 72% from the time Dr. Dumbass (Marc Faber) made his amazing call.

Not having a public track record that "remembers" your wrong market calls can be very convenient.

Landis82 · Jun 26, 2009

Quote from Debaser82:

That's only true cause europe isnt considered as a country on it's own.

Here's something for perspective . . .

On it's own, California is still pumping out around $1.5 Trillion in gross state product. That would probably put it around the 10th largest economy in the World.

One of the more interesting discussions and threads on ET in a long, long time. Kudos to all who have participated!