Guest Post: Normalization: Inflation, Deflation, and Convergence

Normalization: Inflation, Deflation, and Convergence, Submitted by JM

Comments

[God]

With so much money introduced into the economy with such urgency, where's the inflation beef? What is the story behind that? Was it phantom money? Confidence building 101 says look strong, speak loud and sure. The man behind the curtain is not Marla Singer.

[Spitzer]

There will be no demand pull inflation. The whole argument is flawed because it is not about whether we will have demand pull inflation or asset price deflation.

We will have currency crisis inflation where the integrity of the currency gets called into question, just look at the Euro. Is there any demand pull inflation in the Euro zone ? No but there was currency crisis inflation because the price of gold in Euros made all time highs.

The lower US interest rates go in treasuries because of the failed economy, the more the quality of these treasuries will be called into question. What good is US paper if the economy that backs it up cannot pay its taxes ?

[RockyRacoon]

"Full faith and credit" is useless without those taxes, isn't it?  That is really what it's all about.  If the "real economy" does not revive, the faith part is gone, and the credit part is already gone.  Not much left.  Looks like you have a practical view of the situation.  I'd much prefer a quick, total collapse over a Japanese-style slow torture.  Or, I guess we could call it a Chinese water torture -- or is that too close to the truth?

[Noah Vail]

Yes, buy government bonds by all means, even at negative interest rates.

[e_goldstein]

"Yes, buy government bonds by all means, even at negative interest rates."

it's like charging a storage fee for dollars!

[Grand Supercycle]

DOW/SP500 daily chart is bullish for now ...

http://stockmarket618.wordpress.com