The Coming Deflation . . .

The real question here is what does the dollar fall against ?

I have not seen any forecast of the matrix of other currencies...and the more popular commodity items have had quite a run...

The simple example of what happens is this...

There are 100 apartments in a complex....last year one sold for $500,000 thus last years appraisal is $500,000...

This year one sells for $300,000...thus all 100 are worth $300,000 each....

Question is ...where did the money go ? Where did the value go ? This is deflation....

The government then prints 40% more money at a very fast pace...The yuan..euro..aussi...and others shoot up but not for long because their markets are US dependent.......

At some price...the assets work...however the legal agreements
made in banking which are dependent upon corresponding values will force the government to inflate rapidly....

To me....one would diversify and be ready to trade the extremes...One should have already been out of real estate as there were signs all over the place...

The possible dollar knee jerk down also causes temporary excessive commodity prices ie oil....Oil price will supposedly be higher than normal because of dollar dominance in its pricing...

However this is what Paulson and Bernanke are all about...trying to lose as little as possible particularly in a world economy sense...

However....Soros will prove to be somewhat correct in that these moves are somewhat reflexive...which in itself smooths the process....There are lots of sophisticated players already reacting ...
 
Quote from CoolTrader:

If Fed could print enough money to pay off the national debt without triggering inflation, that would be wonderful. It's just too good to be true. We should be concerned about inflation instead of deflation.
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If it’s possible under the conditions I mentioned above it’s not too good to be true at all. It causes a real slowdown, americans lose relative purchasing power and its wealth transfer from households too government or the fed. The bigger the deflationary forces are, the more wealth can be taken from households through the printing press.
 
Quote from Voodoo-king:

The bigger the deflationary forces are, the more wealth can be taken from households through the printing press.
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I thought deflation inherently means the federal government would restrict money flow, i.e., turn off the printing press, thereby making money more valuable. Since the federal government has not shown itself capable of restricting money flow lately, I don't understand how one can think that deflation is an issue.
 
If the printing press was turned off there would be naturally deflation assuming growth. Growth in production would cause more goods to chase fewer goods. So to combat this deflation money is printed. The good news is that normally the fed and the government would benefit from a pro growth environment since bigger growth allows for more money printing without creating inflation. But what if the printing press is used to create instability. First excessive printing combined with low rates to create a bubble, then raise short term rates to burst the bubble, as the bubble burst huge deflationary forces are created by forced liquidation, to fight this even more money needs to be printed. I feel im lost in a circle…
 
it occured to me the thread hits a chord with the use of the word deflation. naturally, I want to associate it with our great depression.

BUT -- not all deflations are associated with collapses and depressions.

So what are we talking about here? Both?
I think there is an implication of a depression occuring simultaneously with deflation, just as our economic history so deeply stews those two concepts and words together.
 
Lack of demand for goods and services, thats the bottom line. The latest example in real time was Japan.

The USA is deflating a bubble in housing from low basement interest rates that were imposed to do what? Correct, to fend off deflation.

Over supply in the housing inventories will only clear the mkt when prices drop and or demand increases. the best way to increase demand is to drop home prices. It is happening as we speak...............i would venture to say the housing mkt will be in a funk for minimum 3 years.
 
For everybody on this thread who is convinced that the Fed won't allow deflation to occur because it's so destructive, tell me why Japan wasn't able to accomplish that? In other words, the Fed may be intent on preventing deflation but will they be able to? Japan wasn't able to.
 
Quote from flier6:

For everybody on this thread who is convinced that the Fed won't allow deflation to occur because it's so destructive, tell me why Japan wasn't able to accomplish that? In other words, the Fed may be intent on preventing deflation but will they be able to? Japan wasn't able to.
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the japanese are a nation of savers. in america its different. americans can be counted on to spend every nickle they have.
 
That's a good point. So when it comes to predicting the liklihood of deflation, you think that it would require a psychology change in Americans from spendthrift to saver?
 
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