Deflation is when capital is flowing out of tangible assets and into money and money substitutes. This capital flow is characterised by deleveraging and a drop in the value of collateral assets. In contrast, Inflation is the flow of capital out of financial assets and cash into tangible assets in a context of increasing leverage. Which do you think has been happening?
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Deflation-stealth in '08 shows face in '10
- Thread starter deadbroke
- Start date
Debt deleveraging deflation completely ignores the fact that we are NOT living in the 1930's, but in a GLOBALISED world economy that is seeing the CONVERGENCE of REAL GDP's where the developing world is EATING up the worlds resources at a faster pace then the west is cutting back on consumption thus DRIVING INFLATION HIGHER whilst at the same time the west is engaged in COMPETITIVE CURRENCY DEVALUATIONS in an attempt to GENERATE NOMINAL GDP GROWTH which has highly inflationary implications.
Governments attempting to inflate nominal GDP's through printing money and near zero interest rates so as to push people towards consumption rather than savings because banks are paying LESS in interest than even the phony official inflation rates. Thus people increasingly seek to hold anything other than negative interest rate paying devaluing fiat currency that can be printed in the trillions at the press of a button. Savers in the UK are realising this as INFLATION EATS a life time of accumulated savings. Workers are realising this as the flow of paper currency raises prices in the shops far greater than the flow of paper into their pay packets that is coming in at an average of 2% against CPI of 3.1%. The paper currency is losing value at a much faster pace than the official inflation statistics, people are waking upto this and will increasingly demand payment in terms of ability to track the price of goods and services not official indices therefore demand wage rises above official inflation indices and thus triggering the dreaded wage price spiral, which as the trend for the convergence of GDP per capital analysis as illustrated by the below graph (Inflation Mega-Trend Ebook Page 54) shows for most people will only be a nominal phenomena i.e. they will not actually be able to purchase more as they will be fighting a losing battle against REAL INFLATION.
The threat of Debt debt deleveraging deflation has INFLATIONARY consequences because the governments will not ALLOW for actual Price DEFLATION because it would INCREASE the real value of government debt therefore increases the risk of governments going bankrupt as the debt interest rises, when the real intention is to INFLATE the real value of debt away. INFLATION is also one of the governments most important stealth taxes on the people whilst DEFLATION acts as a subsidy TO the people i.e. their standard of living INCREASES during DELFATION as prices fall whilst inflation gives the illusion of increasing standard of living as workers are stealthily forced to work harder for less real pay despite increasing productivity.
<img src=http://www.marketoracle.co.uk/images/2010/Aug/us-cpi-26.gif>
Meanwhile, the United States has experienced mild inflation since the Great Recession of 2008-2009 began with little overall change but with a positive trend. However this is set against the mantra of deflation that implies the complete opposite of what actually has transpired despite the worst recession since the Great Depression. So all of the talk of the U.S. being in deflation for the past 18 months has been delusional which does not match the reality of what actually has taken place and given the ongoing multi-trillion dollar deficits look set to feed a trend for a stagflationary economy for the U.S. for many years.
Having been wrong on deflation in even the officially doctored CPI for the past year, delusional deflationists IGNORE this and any other indicator that implies inflation by picking and choosing any obscure measurements that implies deflation is taking place such as pricing assets in terms of the gold price to imply deflation is taking place when peoples food baskets i.e. the REAL WORLD show INFLATION is accelerating away from them, or in some cases implying that inflation is really deflation in disguise because of loss of purchasing power, which is the whole point of what inflation IS ! Where prices rise to erode the purchasing power of your savings and earnings! I hear weak economies mean deflation looms, well try telling that to Zimbabweans!
Do a simple personal inflation test, dig out your credit card statements from 1,2,3 years ago and see how much your food and energy bills have gone up and then you will know how much inflation has taken place during a period of perma deflation mantra. Never mind the amount average food baskets are destined to rise in price going forward!
In the United States the prospects for QE2 ahead of the November mid-terms is growing and coming as a surprise to many quarters when it has been obvious since the first print run that once started money printing cannot be stopped whilst large budget deficits exist, which where the U.S. is concerned probably means continuing for the next 10 years at least as the U.S. is going to milk its reserve currency advantage to the fullest. So all the talk by the press earlier in the year that Q.E. had come to an end and would be unwound has been found out to be completely WRONG. Again, as I mentioned right at the start of QE in March 2009, once started money printing cannot be stopped whilst huge budget deficits exist EVEN AFTER RECESSIONS END. Therefore rather than be withdrawn or unwound, given the poor deficits outlook for the UK and US, we can expect QE to morph into a permanent feature of monetary policy.
The bottom line is that the QE already has yet to feed through to the financial system, i.e. UK £200 billion of money printing as a consequence of the fractional reserve system ultimately resolves into total money supply expansion of between £1 trillion and £4 trillion, which is highly inflation and already manifesting in what the Bank of England calls surprisingly high inflation and in the U.S. the $2 trillion of money printing to date looks set to be followed by at least another $1 trillion this year. So the seeds of high inflation have already been sown that will be reaped during the coming years.
Given the structure of the western economies, all that quantitative easing will do is to boost asset prices and emerging market economic growth and give an extra lift towards feeding the inflation mega-trend for many years.
Etc etc etc at Marketoracle.co.uk
Deflationists shout what WILL happen whereas inflationists shout what IS happening. Trade what you see, not what you think may take place.
Governments attempting to inflate nominal GDP's through printing money and near zero interest rates so as to push people towards consumption rather than savings because banks are paying LESS in interest than even the phony official inflation rates. Thus people increasingly seek to hold anything other than negative interest rate paying devaluing fiat currency that can be printed in the trillions at the press of a button. Savers in the UK are realising this as INFLATION EATS a life time of accumulated savings. Workers are realising this as the flow of paper currency raises prices in the shops far greater than the flow of paper into their pay packets that is coming in at an average of 2% against CPI of 3.1%. The paper currency is losing value at a much faster pace than the official inflation statistics, people are waking upto this and will increasingly demand payment in terms of ability to track the price of goods and services not official indices therefore demand wage rises above official inflation indices and thus triggering the dreaded wage price spiral, which as the trend for the convergence of GDP per capital analysis as illustrated by the below graph (Inflation Mega-Trend Ebook Page 54) shows for most people will only be a nominal phenomena i.e. they will not actually be able to purchase more as they will be fighting a losing battle against REAL INFLATION.
The threat of Debt debt deleveraging deflation has INFLATIONARY consequences because the governments will not ALLOW for actual Price DEFLATION because it would INCREASE the real value of government debt therefore increases the risk of governments going bankrupt as the debt interest rises, when the real intention is to INFLATE the real value of debt away. INFLATION is also one of the governments most important stealth taxes on the people whilst DEFLATION acts as a subsidy TO the people i.e. their standard of living INCREASES during DELFATION as prices fall whilst inflation gives the illusion of increasing standard of living as workers are stealthily forced to work harder for less real pay despite increasing productivity.
<img src=http://www.marketoracle.co.uk/images/2010/Aug/us-cpi-26.gif>
Meanwhile, the United States has experienced mild inflation since the Great Recession of 2008-2009 began with little overall change but with a positive trend. However this is set against the mantra of deflation that implies the complete opposite of what actually has transpired despite the worst recession since the Great Depression. So all of the talk of the U.S. being in deflation for the past 18 months has been delusional which does not match the reality of what actually has taken place and given the ongoing multi-trillion dollar deficits look set to feed a trend for a stagflationary economy for the U.S. for many years.
Having been wrong on deflation in even the officially doctored CPI for the past year, delusional deflationists IGNORE this and any other indicator that implies inflation by picking and choosing any obscure measurements that implies deflation is taking place such as pricing assets in terms of the gold price to imply deflation is taking place when peoples food baskets i.e. the REAL WORLD show INFLATION is accelerating away from them, or in some cases implying that inflation is really deflation in disguise because of loss of purchasing power, which is the whole point of what inflation IS ! Where prices rise to erode the purchasing power of your savings and earnings! I hear weak economies mean deflation looms, well try telling that to Zimbabweans!
Do a simple personal inflation test, dig out your credit card statements from 1,2,3 years ago and see how much your food and energy bills have gone up and then you will know how much inflation has taken place during a period of perma deflation mantra. Never mind the amount average food baskets are destined to rise in price going forward!
In the United States the prospects for QE2 ahead of the November mid-terms is growing and coming as a surprise to many quarters when it has been obvious since the first print run that once started money printing cannot be stopped whilst large budget deficits exist, which where the U.S. is concerned probably means continuing for the next 10 years at least as the U.S. is going to milk its reserve currency advantage to the fullest. So all the talk by the press earlier in the year that Q.E. had come to an end and would be unwound has been found out to be completely WRONG. Again, as I mentioned right at the start of QE in March 2009, once started money printing cannot be stopped whilst huge budget deficits exist EVEN AFTER RECESSIONS END. Therefore rather than be withdrawn or unwound, given the poor deficits outlook for the UK and US, we can expect QE to morph into a permanent feature of monetary policy.
The bottom line is that the QE already has yet to feed through to the financial system, i.e. UK £200 billion of money printing as a consequence of the fractional reserve system ultimately resolves into total money supply expansion of between £1 trillion and £4 trillion, which is highly inflation and already manifesting in what the Bank of England calls surprisingly high inflation and in the U.S. the $2 trillion of money printing to date looks set to be followed by at least another $1 trillion this year. So the seeds of high inflation have already been sown that will be reaped during the coming years.
Given the structure of the western economies, all that quantitative easing will do is to boost asset prices and emerging market economic growth and give an extra lift towards feeding the inflation mega-trend for many years.
Etc etc etc at Marketoracle.co.uk
Deflationists shout what WILL happen whereas inflationists shout what IS happening. Trade what you see, not what you think may take place.
Lot of words JSSPMK. I tried to lay it out for you really simply...watch the flow of capital...that is what is really happening....no matter what the whys are or the intents may be. These opposing processes, deflation and inflation, are long term processes, that persist alongside of the shorter term changes in prices that react to near term supply and demand imbalance. You have to be careful not to assume that spot price change is inflation. Supply demand price change is not inflation and it is conflated with process changes in the price change indexes.
It asia demands more metal than our previous capital investment in production and distribution of such metal can meet, then the price of metal will rise...and attract capital into the production and distribution of those metals so that the imbalance will correct. Consider however, if there is tremendous uncertainty over monetary policy and fiscal policies international that may be conflicting, that capital investment in increased production may be delayed,...in a way mistaked or conflicting policies will not allow the supply and demand to rebalance in long cycle capital intesive sectors...we are already suffering from that effect because of deflation in the late 90's crashing the Asian monetary systems and our related tech expansion, but also driving capital (including intellectual) out of energy and metal investment for a generation.
Sorry that I am now using too many words, my point is that the present price structure is the accumulated effect of past mistakes that manifest in supply and demand imbalances. Past mistakes have been both deflationary and inflationary and they net out in the present. This is why you have to look at the flow of capital to see the underlying trend going forward...capital out of tangibles assets...deflation...capital into tangible assets...inflation....private credit contracting....deflation...private credit expanding...inflation. You can't tell by looking at spot prices.
It asia demands more metal than our previous capital investment in production and distribution of such metal can meet, then the price of metal will rise...and attract capital into the production and distribution of those metals so that the imbalance will correct. Consider however, if there is tremendous uncertainty over monetary policy and fiscal policies international that may be conflicting, that capital investment in increased production may be delayed,...in a way mistaked or conflicting policies will not allow the supply and demand to rebalance in long cycle capital intesive sectors...we are already suffering from that effect because of deflation in the late 90's crashing the Asian monetary systems and our related tech expansion, but also driving capital (including intellectual) out of energy and metal investment for a generation.
Sorry that I am now using too many words, my point is that the present price structure is the accumulated effect of past mistakes that manifest in supply and demand imbalances. Past mistakes have been both deflationary and inflationary and they net out in the present. This is why you have to look at the flow of capital to see the underlying trend going forward...capital out of tangibles assets...deflation...capital into tangible assets...inflation....private credit contracting....deflation...private credit expanding...inflation. You can't tell by looking at spot prices.
Your ID reminds me of a Flat Screen model number...Best Buy is offering 0 interest for a 3 yr term on 55" high resolution LED flatsceen systems with wireless internet interface...prices are half of what they were last year...likely more than they will be next month...but hay, gotta like the terms...and they promise that if prices are reduced again during next 30 days, you can get the lower price difference as a rebate!...I'm going buy one, see you later. You keep checking those prices on 'rare earth', now that must be real inflation.
Quick story, more inflation on products and services.
Talking to a friend today, she went to get her dog groomed, as she was leaving the owner told her the prices were going from $55.00 to $70.00 Starting Jan 2011
The same friend who owns this dog buys canned dog food, just received the bill each can went from $3.19 to $3.49. This is over the last 2 months.
I wish I could make these stories up......
all you fools who think there is no inflation better get ready....
Talking to a friend today, she went to get her dog groomed, as she was leaving the owner told her the prices were going from $55.00 to $70.00 Starting Jan 2011
The same friend who owns this dog buys canned dog food, just received the bill each can went from $3.19 to $3.49. This is over the last 2 months.
I wish I could make these stories up......
all you fools who think there is no inflation better get ready....
Quote from S2007S:
Quick story, more inflation on products and services.
Talking to a friend today, she went to get her dog groomed, as she was leaving the owner told her the prices were going from $55.00 to $70.00 Starting Jan 2011
The same friend who owns this dog buys canned dog food, just received the bill each can went from $3.19 to $3.49. This is over the last 2 months.
I wish I could make these stories up......
all you fools who think there is no inflation better get ready....
Lots of small businesses float a trial balloon at the beginning of a new calendar year to see if they can actually get away with jacking up prices and retaining clients. Something as expendable as dog grooming probably doesn't have alot of pricing power unless they are in Beverly Hills grooming Julia Roberts dogs for whatever price they want.
Come on with this dog food stuff, maybe you can introduce her to the internet and tell he to shop online.
Quote from denner:
Lots of small businesses float a trial balloon at the beginning of a new calendar year to see if they can actually get away with jacking up prices and retaining clients. Something as expendable as dog grooming probably doesn't have alot of pricing power unless they are in Beverly Hills grooming Julia Roberts dogs for whatever price they want.
Come on with this dog food stuff, maybe you can introduce her to the internet and tell he to shop online.
She does order it online. Orders a case about every 2 months.