The Coming Deflation . . .

Quote from gnome:

The Talking Heads say they are not worried about inflation, but they should be.
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As David Rosenberg of Merrill has pointed out:

"The CPI hasn't declined just yet on a year-over-year basis, but just as the real economy was "recessionary" a year ago before the GDP turned negative, the pricing backdrop is 'deflationary' today even though consumer prices have yet to deflate year-over-year.

Those "recessionary" conditions of a year ago, with their normal lags, have morphed into a contraction in real GDP today.

In a similar vein, the current "deflationary" backdrop will very likely morph into OUTRIGHT CPI DEFLATION by this time next year. The forces are already in motion --- in assets, in credit, in the labor market, and in commodities. Moreover, reinforcing this deflationary pressure is the strength in the dollar, which has rallied 20% in the past six months."

The ET "Inflationary Hawks" have been dead-ass wrong. Any aggressive moves to boost the money supply will be offset by the contraction of private sector credit.

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Can you say Japan?

Only they had a personal savings rate at 15% before it declined down to 2% from 1991 to 2002. Their consumer was in a very strong state; helping to keep the Japanese economy glued together.

The savings rate for the U.S.?
Zero.
 
Quote from Landis82:



The ET "Inflationary Hawks" have been dead-ass wrong. Any aggressive moves to boost the money supply will be offset by the contraction of private sector credit.
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There are different types of inflation, depending on the stage of the business cycle we are in.

"...cash-induced changes in purchasing power do not affect the prices of the various commodities and services a the same time and to the same extent.."

Ludwig von Mises

The term INFLATION is used too broadly and isn't understood very well, here on ET and elsewhere, imho. One of the reasons banks can continue the practice with little dissent.
 
Quote from Landis82:

Real Estate as a percentage of household assets now carries TWICE the weighting that the stockmarket carried back in 2001 for the average household.

Real Estate is just starting to come off and probably has a 12-18 month stretch of correcting prices and weakness.

As it is now, construction permits for residential real estate are at a 4 year low.

The coming Real Estate "corrrection" is really going to deflate consumer spending.

While everyone and the FED is so overly concerned about "inflation" ( most of which has not even hit the "service sector" of our economy), I think that the markets and people in general will be rather surprised of how hard the coming DEFLATION will be.

Stay tuned.
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Don't be silly. As the good Reverend Wright has so famously pointed out "America's chickens have come home to roost!" You might see the price of this or that decline for a while (e.g., houses, some commodities) but this will be more than offset by increases in costs for medical care, services, insurance, "defense," homeland security, veteran's benefits, the "war" on drugs, unemployment compensation and prisons. Eventually we will experience not just inflation, but horrible inflation. Better pump up the tire on that wheelbarrow, you're going to need it.

I should not have to point this out, but apparently i do. All modern nations that have found themselves not only with heavy debt, which is common enough, but in a debt death-spiral, have sought to monetize their debt in order to pay off their creditors with cheapened money, and in a hopeless effort to inflate their debt away. The US is no different. The only hope for the US lies in deep, deep cuts in "defense" spending ~80%, and in breaking the medical-drug-insurance-FDA Cartel. I just don't see either of those happening any time soon.
 
Piezoe,

You are so right! Debt is so out of control and destructive. The Feds constant increase of it and the compounding of it with interest upon the debt needs to be dealt with asap. This is exactly what happened when the USSR could no longer keep their country intact, and they could not fuel their warships, they fell apart. I wonder if that will happen to the USA?
 
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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Of course Japan was able to, but they choose not to, and are suffering from years of recession. But they are not in a debt death-spiral that the US is in. So the situations here and in Japan are vastly different. Another important difference: The Japanese borrowed from themselves and thus there was little incentive to cheat their way out of debt via inflation.
 
Quote from piezoe:

Of course Japan was able to, but they choose not to, and are suffering from years of recession. But they are not in a debt death-spiral that the US is in. So the situations here and in Japan are vastly different. Another important difference: The Japanese borrowed from themselves and thus there was little incentive to cheat their way out of debt via inflation.
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http://www.japaneconomynews.com/2008/09/08/bank-of-japan-savings-deposits/

549 trillion yen (around 5.5 trillion US) are in the savings accounts. This sort of cash in the system explains how japanese bond yields can be so low even with such high debt to GDP ratios. They actually have the $$$ to afford the debt.
 
I guess that is why the election drama is so incredible. I have not been on a sleep schedule for days! It's the picture of one party rule with a communist in the White House against a backdrop of hyperinflation... dang, I cannot believe that this is really happening, we live in very interesting times folks.. I wonder if hyperinflation will defeat communism or will they ride it to the point where we won't recognize the USA any more?
 
obama has been bought for and paid for by wall street..
where do u think that last 150 million he raised came from?
hint: it didn't come from Harlem, New York
 
Quote from Landis82:

The ET "Inflationary Hawks" have been dead-ass wrong. Any aggressive moves to boost the money supply will be offset by the contraction of private sector credit.

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Interesting that you should write this Landis because it has been my stanch all along.

Which leaves the dollar in an interesting position.

In the end fundamentals will rule as they have always done.
This fluffy period starting in '71, compounded in '82, cranked up by Clinton and pushed to self destruction by Bush, will eventually pass as credit unwinds and people return to a more fundamental and satisfying world.

The size of the word "eventually" holds the key to the next decade or so.
 
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