Deflation, Inflation, Credit, Savings, Earnings and the Dollar

L

libertad

Deflation....real estate prices...stock prices...coming down

Inflation....printing money

Credit......money borrowed

Savings...money that surpasses debt

Dollar....value US currency versus other currencies
...................................................................................................

Lower interest rates create higher real estate valuations

Inflation lowers purchasing power

Deflation lowers purchasing power

Lower interest rates....lower savings incentives

Credit...creates money liquidity

Savings...facilitates credit...offers money liquidity cheaper
than paying interest on credit...

Earnings....facilitates savings and credit...

Dollar.....buys more when worth more...buys less when worth less...

....................................................................................................

What the Fed can do...

Raise or lower interest rates
Print more or less money
Change reserve requirements
Moral suasion

Interesting optimality problem at hand.....
 
Quote from libertad:

Deflation....real estate prices...stock prices...coming down

Inflation....printing money

Credit......money borrowed

Savings...money that surpasses debt

Dollar....value US currency versus other currencies
...................................................................................................

Lower interest rates create higher real estate valuations

Inflation lowers purchasing power

Deflation lowers purchasing power

Lower interest rates....lower savings incentives

Credit...creates money liquidity

Savings...facilitates credit...offers money liquidity cheaper
than paying interest on credit...

Earnings....facilitates savings and credit...

Dollar.....buys more when worth more...buys less when worth less...

....................................................................................................

What the Fed can do...

Raise or lower interest rates
Print more or less money
Change reserve requirements
Moral suasion

Interesting optimality problem at hand.....
More...

Raise or lower interest rates, print more money, change reserve requirements, moral suasion. IMO, all these options can only buy the fed a very short amount of time. The p[roblem is too large and the bubble too pumped for any of these things to have any effect. There is only one way out of this and it is PAIN...
 
Excellent Commentary
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Drsteph wrote

only interesting when its not your currency....

I think you meant to say that deflation increases purchasing power...
....................................................................................

You are right...normally...

But in this instance....lower house prices...and the resulting impetus in credit facilities....impedes credit liquidity...whereas in this phase...directly impacts the ability to consume....albeit in a weaker dollar world...for the locals only...with respect to immediate pp...

This brings up the interesting means of valuation....this means emphasizing cash flow...no matter that the cash comes from credit....in that credit became a more important cash flow source...when interest rates shifted down below 100 basis...

Normalcy is the main objective at some point...possibly years...where savings are rewarded...and credit is relatively scarce...

Right now...the Fed has to dance with the girl that they brought to the party...
.....................................................................................

Also the game is on...... about foreign ownership of the best US based companies...Seems like a good time for oil welfare states to diversify their future prospective businesses...

Notice..the seemingly perfect oil price hedge versus the dollar....
 
Lib, I get ya, but I'm just not sure this is the collapse that people have called for.

Frankly:

1) its overdone
2) its too obvious
3) its clearly orchestrated

not to say that the problems aren't real or serious. I just doubt that the day of reckoning comes so quickly. If it was real, you wouldn't see oil at $100 - it would be at $10. This is not the world of post-crash 9/11 - we don't have our leaders exhorting us to spend for the sake of the republic (yet).

MLEC allows for the bid to exist and an orderly disposal of the assets,l or even some recovery of value.

Immigration reform allows for new creditors.

Of course, not to say that things can't go horribly wrong. But chances of that are less than we all expect, I think. You do have to realize that if you kill the game, you might not be as well off as you expect... political turmoil & populism have a way of wrecking fortunes of the wealthiest as despots confiscate and countries balkanize.

This is the heyday of the oil economy. And I do hope those mideasterners are taking advantage of it. Because after a few short years of this, they can kiss the value of the precious commodity goodbye. Fuel cells, anyone?

If at 1.50 EUR/USD we start seeing media coverage I'm going long USD. For real.
 
Excellent Commentary As Usual
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Agreed...

Smoothing....of course is the strategy...

Very similar to the idea of a market mandate....not responsible
for moving up or down...but how it moves ...up or down....
 
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