QE Lead To Deflation?

[tommo]

I can see there are huge cracks buried deep down in the economic system from government intervention in the markets... particularly since "The Crisis". I and many other people predicted at the time that we would have zombie companies propped up by bailouts that should have failed, that we will back ourselves into a corner where we are addicted to 0% interest rates and the thought of even going to 1% makes people worry the whole deck of cards will come crumbling down. I still believe these hypothesis are playing out.

But I have to admit where I was way wrong was the inflation story. Common sense says when you print unbelievable amounts of money prices should increase rapidly yet we have just seen the UK announce it is in deflation (first time in 50 years), energy prices sent tumbling 50%, various agriculture markets very weak.

You could argue we are creating bubbles in asset classes such as bonds and equities but that doesnt effect the average man on the street as much as a conventional inflation story.

The way i see it we are pouring gasoline on a fire but I have to admit I thought it would have caught light now in a big way. What do you think?

 

[loyek590]

energy and food are not included in inflation calculations, which I think is proper
but we didn't calculate the influence of technology like fracking and horizontal drilling and GMO on combating political turmoil in Mideast and unfavorable weather

 

[loyek590]

because I don't want monetary policy based on weather and war

 

[loyek590]

well make up your mind, in one post you say technology has smoothed out inflation in energy and food, and in another post you say energy and food should not be considered when calculating inflation and you don't want the fed making monetary decisions based on it.

which is it?

 

[Scataphagos]

QE is an effort to combat "deflationary forces".

The "only" inflationary force the Fed appears to recognize is "wage and price" spiral.

Well, we've got a HUGE oversupply of unskilled labor in the US... augmented, of course, by Odumbo's "open border" policies.

Waaaayyyyy too many people..... and too few quality jobs.

I don't know what the REAL solution is, but I doubt printing money is it.

 

[loyek590]

and that is why they call it the "dismal science", no different than the Psychology Department at most Ivy League schools. It's not based on anything scientific that a professor in the Math department would approve. The economists and the psychologists should get together and talk, because they speak the same language, and leave real science to the mathematicians and the astronomers.

or in other words, don't fight the fed, but don't believe everything they tell you

 

[loyek590]

because weather is too unpredictable (at this time, but could be very predictable in the future) and war is too easy to create

 

[syswizard]

Well, we've got a HUGE oversupply of unskilled labor in the US... augmented, of course, by Odumbo's "open border" policies.
Waaaayyyyy too many people.... and too few quality jobs.

Better include SKILLED LABOR as well....thanks to our government's H1B visa program which has flooded the technology labor market with nearly a million foreign workers over the past 10 years.

Lower wages = higher profits for shareholders only.
Lower wages = less money chasing goods and services.
Less demand = lower prices.
Lower prices = deflation.

 

[loyek590]

teach a greyhound how to chase it's tail and you would just about have it figured out

 

[JamesVU2000]

teach a greyhound how to chase it's tail and you would just about have it figured out

I can see there are huge cracks buried deep down in the economic system from government intervention in the markets... particularly since "The Crisis". I and many other people predicted at the time that we would have zombie companies propped up by bailouts that should have failed, that we will back ourselves into a corner where we are addicted to 0% interest rates and the thought of even going to 1% makes people worry the whole deck of cards will come crumbling down. I still believe these hypothesis are playing out.

But I have to admit where I was way wrong was the inflation story. Common sense says when you print unbelievable amounts of money prices should increase rapidly yet we have just seen the UK announce it is in deflation (first time in 50 years), energy prices sent tumbling 50%, various agriculture markets very weak.

You could argue we are creating bubbles in asset classes such as bonds and equities but that doesnt effect the average man on the street as much as a conventional inflation story.

The way i see it we are pouring gasoline on a fire but I have to admit I thought it would have caught light now in a big way. What do you think?

Neo classical econ doesn't even mention debt possibly being a problem. That's how clueless bozos like bernanke were. Household debt seems absolutely stuck at 14 trillion after 7 yrs of QE and uncontrollable gov borrowing. The inflation may come as investors realize that loaning to govs is far more risky then they think. It won't come from growth but through fear. Japan is very close to destroying the yen