All I can say is, "Wow!!!!" Has anybody seen this thread...
http://www.elitetrader.com/vb/showthread.php?threadid=143310
It sure looks like Random.Capital's third alternative!
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Inflation not Deflation?
- Thread starter ShoeshineBoy
- Start date
All I can say is, "Wow!!!!" Has anybody seen this thread...
http://www.elitetrader.com/vb/showthread.php?threadid=143310
It sure looks like Random.Capital's third alternative!
Quote from flyingiguana:
real estate might not bottom until 2009
Well, I was not trying to guess the bottom. I wondered how RE would do relative to commodities in the next 10 years.
If scenario develops according to Jim Rogers - we will see inflation and commodities boom in next 10 years. Say we use current time as departing point (US RE has corrected a bit, depending on location). Would RE rise as much as a basket of commodities? Or it is tapped out and is not a real inflationary hedge anymore? Not clear to me. Trying to put picture together.
Quote from Random.Capital:
The single biggest argument against price inflation is that it requires either strong increases in outstanding consumer debt (unlikely from current levels) or strong increases in personal income (hasn't been the case for three decades, what will change it now?).
I kind of agree with you. Nowadays, it appears that much of the extra "printed money" ends up in assets and not necessarily in commodities or wages, a la the Greenspan Housing Bubble. If interest rates stay low, which is very likely, where do you think the money will go? In Japan it went into the market and real estate. Where will it go the next time? That's the question.
But what I was getting at is that Greenspan Housing Bubble was an inflation even though it was sector specific and not the typical wage-price spectacle that we're used to.
I would arge that the bottom line is that all that extra money has to go somewhere and whereever it goes will create some kind of inflation...
Quote from maxpi:
Disregarding the credit freeze and subprime problems we were on the very verge of going into recession anyhow, it was that point in the business cycle.
I would argue that that is becomingly increasingly difficult to predict. Think about this: they pumped so much into the system that we had an almost unbroken bull market throughout the 90's. Of course, there was hell to pay later first in 2000 and now with the Subprime Crisis. But the bottom line is that noone believed in a ten year bull before the 90's. (Somebody can correct me if I'm wrong, but I don't think we had anything like that before...)
In other words, business cycles ain't what they used to be...
And think of Japan: ten years in the toilet.
Quote from TraderD:
Well, I was not trying to guess the bottom.
Don't even try! Imagine trying to predict the price of oil in the last year or so. Talk about an unimaginable bubble. It's nothing but pure market madness. There's no one who can predict stuff like that. Even if they did, they'd be wrong about the next major market event!
And nowadays you have programmed trading, hedge funds, derivatives, much more open markets, truly global investing and a host of other new paradigms. No one has a crystal ball to handle all of that...
Persistent inflation requires persistent credit growth. Arguing that inflation can last "forever" is equivalent to arguing that credit can grow "forever".
Quote from Random.Capital:
There is a third alternative rarely seen in market-based economies - so many buying choices disappear from the availability so the money is left chasing a much smaller selection of goods. This happened in the USSR, and would seem rather unlikely in G7 countries without a major collapse in international trade.
So, considering the article posted after you made this statement seems to be supporting this case, what exactly does it mean?
Increased prices, yes, but increased prices that could be alleviated quickly because production could ramp up as quickly as new demand is created? Thanks everyone for all of your insight.
Quote from Random.Capital:
Persistent inflation requires persistent credit growth. Arguing that inflation can last "forever" is equivalent to arguing that credit can grow "forever".
I agree it can't last forever as you can see from above. But it can last for a very long time a la 90's. And, again, the 90's was not inflation in the traditional sense...
Quote from Random.Capital:
Persistent inflation requires persistent credit growth. Arguing that inflation can last "forever" is equivalent to arguing that credit can grow "forever".
Other than the occasional odd contraction, inflation is a one-way street.
Since the creation of the Fed, the $USD has lost about 99% of it's value... which is why a candy bar used to be a nickel, now is .$89 (smaller size makes up for the rest)... or, when the WSJ came out, a copy was $.02... now, $2.50.
Inflation will continue until we implode in a currency destruction collapse.
Quote from scriabinop23:
You are missing the big picture. A deep deflationary trend would be disastrous. Debt to GDP was around 15-20% I believe at the start of the depression, and we had no entitlements to dole out back then. We could actually *afford* a cleaning back then without destroying the currency, despite the painful event that it was. The same isn't true today.
Deflation would be better if we weren't so steeped in debt and obligations. We have $2700B coming in every year and more than $3000B going out. If you had a deflationary trend like the great depression and tax revenues cut in half, how would you manage an already $10T-$11T ($6T-$7T) of debt on top of $1.5T+ of current medicare and social security obligations (which are merely recirculated back into the economy)?
We can't afford deflation until we half the national debt, cut defense spending from $600-700B+/year to $100/year, and roll back social security and medicare benefits to more manageable levels (means based exclusion possibly?)
The same destruction to GDP that happened in the great depression happening today would make a modern great depression all the worse, and result in a collapse of the currency and even worse chaos than trend inflation.
It is clear the long term trend is inflation and supply rationing either way, due to weakened exchange rates (rather than solely aggregrate demand).
this is why i've thought for a year that the best outcome is stagflation. erode real wages and profits while tax revenues don't drop off the map.
gonna be interesting to see how obama handles the next couple years.