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Inflation Or Deflation?
By Nic Lenoir of ICAP
The jury is out: I have been in the deflation camp personally for the last 2 years, but I hear the arguments for Zimbabwean hyperinflation, or the case of the oscillation in no man's land as governments and central banks stop us on our way to the deflationary Kondratieff winter at each market collapse with a new round of monetization. Maybe this last cynic remake of the Japanese lost decades is the most obvious way to bet on the demagogy of our modern "capitalist" system where government are helpless against deflation and will therefore sacrifice our future and the planet if they have to in order to save whatever face they have left.
Either way, which ever case you are leaning towards, it is important to find indicators that will tell you what the market is leaning towards, as ultimately it is the only way t make money if you don't have the capital or luxury to hold out your positions through monkey reversals like we saw today.
I will start with the inflationary case. If today's move has legs and we are going to get an established weakening of the USD trend along with higher commodities, equities, and raging emerging markets, then the two following patterns will be triggered: Inverted H&S in Copper (neckline currently around 308) and inverted H&S in Bovespa (neckline currently around 65,500 which also corresponds to the 100-dma and 200-dma which just posted a bearish cross). Given my bias I will be looking at shorting the Bovespa around that are because of the moving average pattern and the strong resistance. However if both patterns are validated then clearly the market could have serious legs as there will be shorts to squeeze and fake break outs is a privilege reserved to shorts.
On the deflationary side, look for USDCAD and USDCLP to be very good indicators. Both have also unbelievable inverted H&S patterns in progress, drawn out over much longer period, and the resistance has been tested enough that a break on a daily close is bound to trigger a violent move. Obviously both CAD and CLPare commodity currencies. We had recommended onds in USDCLP at 505 and 514 which worked beyond our expectations, so we will keep a great interest in the cross and stick to our ultimate conviction that it will ultimately break out higher. Regarding CAD, on the downside we can easily retrace back to 1.0125/1.02 before moving higher, we would advise buying in that support zone (which a clear stop if we close daily below 1.01) or on a daily break of the neckline on the upside.
Regarding today's price action, we had a failed wave v) this morning so instead of testing the 1,045 support we reversed at 1,050 and went straight to the upper end of our resistance area. Above 1,087 I am no longer bearish and will wait for one of the charts mentioned here above to kick in. It is worth noting that other than the just released AAPL earnings which were great but are necessarily tainted by the IPhone 4 fiasco, the rest of the releases were poor, and so were economic numbers. The reversal today was triggered by rumors that the stress test in Europe has been passed by everybody and that the Fed will stop paying 25bps on reserves pledged. A word on each of these two farces is in order. Regarding the stress test, knowing that in the US authorities asked what they thought to banking executives of the test before they had to take it, it is hard to take the news of a leak with a straight face on a day where the market needed a squeeze catalyst. As for the Fed, it fought hard to obtain the right to pay interest on reserved. This is something they have wanted to do for years and obtained in the after math of the 2008 debacle, so it is odd to say the least that they would give it up now. They could lower the rates paid to Fed target less 25bps (or in the present case 0) but that would be drawing some little needed ridicule upon themselves. For these reasons, I will as Saint Thomas only believe these rumors when I see the facts.
Good luck trading,
Nic
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Weimar hyperinflation was caused by failing to balance the budget. And with the extension now in place, and the uncontrolled and accelerating treasury auctions, in the long term I'm in the inflation camp.
Yes, but it was also caused by the government making it illegal to fire workers and wages were tied to the price of basic materials, i.e. index linked. Zimbabwe had a similarly high level of workers allied to the state. No matter what some may say, the majority of worker =s in the US are privately employed with no index linked salaries, so it is far harder to create the necessary feedback loop for hyperinflation.
It's simply laughable to compare a bottom of the barrel, third world country to the U.S. Ok, you guys go back to shorting the dollar. Seriously, it's going to zero right? Buy more gold. Buy at the top!
@EK
"Weimar hyperinflation was caused by failing to balance the budget"
Yes, that's why these problems are solved 2011.
There's no way TPTB can fail to balance a budget that doesn't exist.
Even BB or Timmay can't fcuk this up.
LMAO
Weimar Hyperinflation had numerous causes see....When Money Dies by Adam Fergusonn....a hard to get book, but the author has written a cliff note version which you can find online....
I'm no fan of the policies of our government, but we have not had a balanced budget for a long time, and neither has Japan...and so far no hyperinflation.
Just chronic, slow, progressive inflation for 100 years.....
high inflation should require economic activity first to get balance sheets extended......and we have a shortage of that at the moment...
The treasury can stay out balance forever and still not get hyperinflation...in fact they might even default...that is really a political question not a set in stone economic fact....a default probably would lead to a serious deflation...
It seems obvious that politicians will borrow forever.....but we can't be sure what the future will bring until its here.
Our situation is quite different from that of Weimar or Argentina or Zim.....
If the dollar collapses....then the entire world banking system would collapse...so I don't think we will allow that to go on for too long....
If it happens it will be pretty short and they will have to push the reset button. The superrich will still come out on top by virtue of owning everything anyway.
What you really have of value in the end is your ability to work. All your resources can be either devalued or confiscated....by who...by us of course...
"If the dollar collapses....then the entire world banking system would collapse...so I don't think we will allow that to go on for too long...."
Nothing but hubris up in theah. You 'Murkans are so melodramatic, that post reads like an Italian opera.
Lotsa options for reforming the world's reserve currency that don't involve the nth coming of whatever deity you sacrifice your kids' birthright to in the misnomer of 'capitalism' on the altar of Wall St. these days.
Now, I know these guys have their problems, but one of them includes deciding how to unload a Trillion (count 'em) plus worth in USD denominated investments... That is almost enough if estimates of M3 are anywhere near the mark to, I don't know, maybe have a say if not outright 'decide' the composition of a reserve currency, no?
"You'd better learn to like them, is what I say."
http://www.youtube.com/watch?v=04QoA44c23A
Anyway sorry to interrupt Amerika, time for you to get back to your regulary scheduled reprogramming:
http://www.youtube.com/watch?v=t4zYlOU7Fpk&feature=player_embedded
Disagree.
A total collapse of the USD would utterly decimate the world economy.
I suppose you believe in decoupling, too?
It's not melodrama, any more than your post is as dumb as cut footage from Fraggle Rock.
http://thafeedback.com/wp-content/uploads/2008/04/fragglerock2.jpg
Maybe in your mind. But only if you equate Eric Idle and Eric Blair with Jim Henson. Good luck with that. I mean at least my links were in context. But really, what should we all expect from a comment that bases the crux of its rebuttal soley in the 'No, it isn't' category, along with the tiniest pinch of ad hom?
Sorry if it got to ya, ya big girl's blouse. Truth hurts?
'Murikens: the goofy ones are so sensitive, aren't they?
Yeah, I read it (the full version). Definitely a recommended book.
Japan have so far been alright, due to the majority of its debt being internal. It's far easier to screw over domestic savers than foreign. And the US has been alright so far, because it's got the reserve currency. But, with ever spiralling deficits, the Dollar won't continue to be the reserve currency indefinitely.
As for deflation - IF defaults are allowed, then yes, we're heading for deflation. But the politicians are following the beat of 1921-23; printing money is the easy solution.
http://university.unitedstatesliberty.org/654/textbooks/adam-fergusson-when-money-dies-nightmare-of-the-weimar-collapse/
Full text is there.
Not gonna happen Escape. Not with the level of debt out there. The consumer is still choking on debt. It will happen only if the rest of the world looses trust in the USD to a point it tanks. Which it might?
Inflation is a economic/monetary process. Hyperinflation is a psychological event.
Hehe, Decon I don't think your avatar has 'thought his cunning plan all the way through'.
Spot on, otherwise.
Regards
" Above 1,087 I am no longer bearish"
Nic, I agree and will exploit the move but I don't think selling 8.4 Million iPhones and $3.2 million iPads means we have enough consumer buying power to create hyperinflation.
"exploit the move"
i hate doing that... got to tho
Agree 100
Hyperinflation isn't created with consumer buying power !
Hyperinflation is caused by a dramatic rise in the perceived risk of holding currency, a crisis of confidence in the government's ability to honour its future obligations by any other means than the central bank monetizing its deficit.
That's why in a deflationary environment ie with no risk of inflation there is paradoxically an increased risk of hyperinflation.
You're right, hyperinflation is caused by loss of confidence in the country's bond market.
While my post was intended to be tongue in cheek you're still going to need some kind of increase in economic demand to to close the loop.
It depends on your situation but most consumers have suffered from asset depreciation and wage loss. This is most definitely inflationary for the consumer since purchasing power and wealth has been diminished. It is deflationary for many of the companies trying to sell goods like cars and housing to consumers. It all depends whose Ox is getting gored.
Only if the businesses do not have to drop their prices.
For this question, it's instructive to look around the world at developing nations and see how price structures are. Take a look at Brazil for example. Got some 1st world places, some 3rd world.
Average salaries are very low, and the price of TVs, cars, etc., are very high. Despite the car companies making the products there in the country and employing cheaper labor. It's still R$90,000 for a Honda. Food is fairly cheap, but consumer electronics, designer clothing etc., very expensive and out of the reach of most.
Same is true in latin america, including Argentina and other places.
Anarchist, I am confused by one of your comments. When you say that "most consumers have suffered from asset depreciation and wage loss," I do not understand how that can be inflationary. If consumers have very few remaining assets or income, they cannot buy anything. Won't that lead to deflation?
You'd think that, but it's always the case.
(purchases * (price - cost)) = profit
If we assume profit must be a constant but purchases drop, then either cost must sink or price must rise to maintain profit. Well, we've already lowered costs by laying off tons of people (but the accompanying drop in purchases was a "total surprise"). All that's left is to raise prices, hoping you can squeeze more out of the suckers faster than they abandon your product.
As shortsighted as business has become in this country, I wouldn't put it past some to try charging near infinity dollars to an imaginary number of customers.
Prestidigiflation.
++
Obfuscationflation?
http://articles.moneycentral.msn.com/Investing/JubaksJournal/FedKillsAKeyInflationGauge.aspx
Fed kills M3, decides money supply doesn't count.
Prestidigiflation means: No standing behind the magician.
Preacher:you. Choir:me.
Apple makes "things" that are completely irrelevant in the long run.
A fad like disco and a "Flock of Seagulls".
The real action is determined by China's middle class and Chinese banks. It was China which lifted the commodity trade over the last year and now China is slowing down and buying less.
Double dip means that China and other emerg. economies are now joining the recession ranks and pushing those formerly recession plagued economies into depression.
Inflation was there. Inflation can only come back if money virtually falls from the skies and drops into every household. Then the buying power of fiat will cease to be measurable.
Until that happens, I remain in the deflation camp.Deleveraging, increased interest rates and less money in the hands of the masses.
Apple is like make up on a pig, like a rallying cry to a starved population to hold on to something anything even if it's just another crappy i-phone.
Steve Jobs controls his flock of believers.. until Steve Jobs doesn't. Then what?
walküre: Apple's earnings aren't irrelevant because of any fad nature to their sales. Instead they are irrelevant because they reflect the software quality and product-line integration of Apple, no one else. The earnings don't reflect the tech industry broadly, or the larger economy. I've run my biz on Apple equipment for more than two decades. The gadgets are just a plus, the iphone and ipad. Since OS X their laptops have been incredibly convenient for serious work. Apple actually has great mind-share among several very different groups: ipod walkers and joggers, MacBookPro programmers and other tech types, and a core of music and advert production people, film makers.
"gadgets" .. you said it, not me.
it's a toymaker, not more.
will Apple feed the world when food supplies are steadily declining? can people eat Apple products? can people use Apple products to barter? that bit in the "book of Eli" was a stretch imo. wondering how much Apple paid for that product placement.
people are loosing their jobs. they don't care about Apple i-this or i-that.
Apple is a fad, a remnant of an economic era gone by.
think of the big picture.
Too bad the rest of the world disagrees. They make computers, phones, and easily portable music devices. Pretty popular shit. Most people I know like having their computer, phone, and music. Your world may be ending, but mine ain't. The data says your wrong.
Apple's singular success does little for the overall economy. It's good for Apple's employees and their investors. We would need hundreds of Apples to right the ship. One just won't do it.
I'm just talking about Apple. I think the world economy is a total mess.
please. you sound bitter that you didn't buy a few hundred shares last year at $106....you are on drugs if you think AAPL is just a toymaker and networking is just a fad. although your flock of seagulls comment did make me laugh. I ran.
2 words : Sony Walkman
I played gold miners since last year and have done well. Who needs AAPL and make 100% gain when you could have bought ANO or VEN and made 600% gains? Disclaimer... I didn't realize that fully.
The Flock of Seagulls comment dated myself. I started playing the markets in the Eighties when my peers would stand on the street and protest against nuclear weapons. Loved the markets back then as we were just coming out of recession.
This time is different. It does not feel like we're leaving a recession. It feels quite the opposite.
Whatever Apple's next toy is going to be, will mean diddly squat to millions of unemployed people.
If we cannot get employment, prospects of employment and career planning sorted out, the country we grew up in will look very different in a few years than we can possibly imagine.
We need jobs. We need the jobs here and not in China where Apple's work environment must be bad enough to prompt more people than anywhere else to commit suicide.
How does that fare into the fantastic performance of Apple stock?
People that mass produce their shit are committing suicide in China. Oh yeah, that's great. Is there an app for that?
said the man from his computer
how many computers can a family or company own?
how many times does it makes sense to upgrade either hard- or software?
what if marketing manipulation turns your family into fucking zombies that cannot think for themselves?
Apple is part of the problem.
There's no real information. Just disinformation, manipulation and most importantly :
ADDICTION
Dude, what are you talking about?? I can't even believe you are on a computer and on the internet with this attitude. There are a billion PC users out there that can be converted to mac users. You don't pay to upgrade mac software. People use mac products because they are easy to use and are quality products compared to the competition. People like to buy their stuff because they enjoy using their stuff. This is not complicated. Unless you live in a tent or a cave, you are a hypocrite.
Precisely! Which always leaves me wondering why anyone even bothers wondering about QE 2, 3, 4 . . . ? It's already here. It's been here all along.
+10
Governments worldwide are aiming for hyperinflation as a mean for default; none have the means to pay back all the debt anyway. The thing is nobody wants to be the first and, so far, the strategy has not worked except for making the total debt even worse and the default more likely.
I don't know, but it feels that governments will go bust before hyperinflation saves them. The general populace will suffer either way.
+10
A lot of people think their credibility depends on the brand they have in their pocket.
So true. I bet this is actually the top in AAPL mania. All consumer products are cyclical, as the trendsetters will move on to something new. AAPL is too mainstream now to be cool to the early adopters. Android will probably do better in China/East, as HTC and other locals build products with lower price points. RIMM used to be considered invincible, and look at where they are now. MOT too.
I used to be an AAPL product hater, but I do like my iPhone and iPad, as they are simple to use (proceed with junking). That being said, if I had the patience I'd short the stock. 2-3 years from now, it will just be another consumer products company. Stock now off the AH high by about $6.
People want laptops, phones, music, and workstations to be integrated and easy to use. Apple provides that. I think the trend is a consumer trend to reject a variety of appliances and laptops that don't work so well together and, gee, look too tech, and each in their own way. But apple is just one piece of the tech industry. Their success simply signals that they understand tech in user-land. Once scoffed at as "luser-land" by nerds, the tastes and work habits that should matter to tech lie in only two places: User-land and the large tech back-office of web co's, banks, and manufacturers. The once fairly arrogant elite-feeling programmer world has a new name. India. Apple's ramp up over years can't be busted by India/China. IBM's can. HP's can. Indeed, Google's can be. Think about it.
"People want laptops, phones, music, and workstations to be integrated and easy to use"
people want jobs. no jobs, no paycheque. no paycheque, no money for toys.
simple.
I agree ... iPhones and iPads are still being bought with credit cards that are near maxed out ... AAPL market cap is 230 Billion. Will it go to 1/2 T without hyper inflation?
Is there an "app" for helping you grow potatoes, manage the most efficient consumption of potatoes or potato storage?
If not I'm not sure Apple has much of a business model in a few years...
IBM's cannot ... they are primary supplier to US Gov.
very nice insight to the lowest common denominator and a play on the commercialization of doubt.
Yep, thus the emergence of positional goods....
Inflation seems pretty unlikely until stimulus hits the real economy. At the moment its more in the banksters' pockets. When I see evidence of small business expanding, jobs being created and velocity of money returning, I'll be concerned. Until then, not so much...
+1080
So for now the inflation is confined to NYC, DC and Hampton's real estate, private school tuition and restaurants with long reservation lists.
+++
MSM expresses it as "NYC real estate holding its value (or gaining)" and "high end restaurants still thriving in recession" ... or some similar headline.
Wealth/Power doesn't seem to me to be how much you have, its the difference between someone's position and everyone else's. One doesn't really have to climb the ladder/make a single dollar more to move "up" when instead you can push everyone else down and get the same result.
Would think inflation/deflation can work the same way
Dow long term (two decade) chart screams H&S deflation. Either way, precious metals (money) will go up in relation to paper assets like stocks or houses. Doesn't even matter what people brand it with these made up terms.
Deflation will continue until the morale improves.
Right now, there seems to be a closed loop between the fed/treasury and Wall Street, and the vast majority of money created in the past 24 months is contained within that tight loop.
Over time, the morale (hopefully) will improve. Banks, small businesses and consumers will gain more confidence and that money will begin to seep out of the loop, and diffuse into the economy. Velocity will increase, and inflation will begin to have a push on prices. Until then, inflation will be muted and contained within small pockets of the economy, like Apple retail stores and gun shops in red states.
The only meaningful inflation that I've seen is the value of the stock market, the seemingly endless demand for treasuries and Wall Street profits. All three seem unsustainable, and are the consequences of that closed monetary orgy between the Fed and the Brioni suits on Wall Street. At some point, the Wall Street bankers will get greedy, complacent and bored with the old hags at the Fed, and will look for other avenues of profit. That's when Wall Street puts their hands back into main streets' pants and jerk them off - with permission - again.
The question is whether or not the Fed will be able to stop the orgy from spreading and mop up all the sperm trails (the excess liquidity) before everyone slips and falls on their face. Probably not.
Wall Street is the Fed. That is why there is a closed loop.
Inflation:
energy, food, tuition, government taxes
Deflation:
housing, wages, consumer discretionary
I'm not a fan of discussing the two without talking about how the indexes might show little inflation/disinflation without talking about the continual squeeze in living standards as essentials go up and wages go down. My local state university is raising tuition by 14% two years in a row - which is the state allowed maximum.
Oh, and you can have deflation => deflation => hyper-inflation, as mentioned in the article when confidence in the currency collapses.
Don't forget Healthcare in there with energy, food etc
Inflation: mostly applies to the stuff you need.
Deflation: mostly applies to the stuff you don't need.
It's kind of been like that for a while anyway.
Mostly...subsidies and whatnot cloud things up (food, housing etc.) but mostly.
Think about it.
+100
Seen that for 15 years.
Brass plated crap and electronic gadgets for your house? 1/3rd 1990 prices.
The house itself? 300% higher than 1990
Monetary policy success!
Joe,
I agree !
What you own is deflating and what you need is inflating.
or
Luxuries are deflating and necessities are inflating.
I can't help but think that the printing presses "are" already "Screaming" into QE 2.0
Awaiting its announcement ?
Soon !
Not until market tanks or looks like it will fall off the cliff ... look at the timing of their 2008 actions ... never acted until they had to to curtail collapses.
They may be QE2'ing but , as you say, they will announce it ... but only when they need to
I'm still betting on both; DeInflation.
Deflation applies to everything that the middle class owns: real incomes (50 year downtrend), employment levels, real retirement income and assets (social security and medicare will be whittled down again and again) and of course real estate and the value of small businesses.
Inflation applies to everything the middle class needs: raw materials, food, healthcare, insurance, education, transportation, credit card rates, security, telecommunications. And taxes: every kind will increase including "hidden" ones. But municipal services will decrease.
The rentiers will triumph as they did in Weimar. At that time their goal was to destroy the democratic form of government and replace it with autocracy.
"At that time their goal was to destroy the democratic form of government and replace it with autocracy"
Any difference now?
Call me crazy (which I know I'm gonna get sh!t for this) But I don't think deflation will happen because the only way to destroy a currency, (other than giving the constitution over to private banking) is through hyperinflation. I don't "think" preservation of the dollar is the intention, destruction of it is because it will then send us into begging for a way out and the solution will be........... another fiat currency such as the amero. Obviously, alot of people on here are much more intellectual on the subject than I am perhaps, which I pay hommage to, but I do believe central banking is looking for that one world currency deal. Then, game over, prison planet.
In a vacuum I would agree, but there are forces at work (voters and regional Fed presidents) who are arguing for austerity. I'm sorry, but I don't see QE to the moon as a sure thing at this point. If it was, Krugman wouldn't be squealing like a stuck pig.
Obama scolded G20 leaders on austerity and indicated that we will be inflating.
With both Obama committed to it and HeloBen on board, how are we going to avoid QE2. The Media will be making impassioned pleas for it ... we got to have it or we will have to let our states and cities go without fire and police ... (oh, I guess that's ok, we'll just get a Federal police force to do the job).
They can't even make the Euro work, one world currency is a pipe dream of the financial elite rehtards.
Hyperinflation = the little amount of capital left is destroyed, everything becomes credit and command and control eCONomies prevail. Average investor screwed.
Deflation = Banks lose, polititicans lose, not likely. Average investor screwed.
yay someone else gets it
Deflation is the decrease of the money supply, today you use credit as money.
Inflation happened from 1945-2008 at a 4-15% rate during this time period... year in and year out... .credit creation peaked in dollar terms at $4.7T in 2007.
Since 2007, a collapse of inflation which is deflation we are currently at a $808B(-) annualized rate ... this is a fact, there is no inflation or deflation camp.
http://www.federalreserve.gov/releases/z1/
Sorry, but you are in a death spiral, of course it was given that this would happen, it always does.
- 808 inflatchez!
What is scary is realizing what would have happened in 2008 without massive coverup.... in two years the system went from creating $4.7T of new credit to -$808B rate of destruction. To put that in context, the system started at $440B in 1944.
The scary part is in the future, decades of destruction.
Inflation is dead for the rest of my lifetime and I figure at least a generation past that this time.
If you believe in the Helicopter Ben lie, you would be buying anything you can get your hands on... houses, stocks, corn, wheat, oil, etc.
Eventually the collapse of the post WWII global trade and credit system. The only way you get out of this on short-term say 20-40 years is if you hire another Hilter to destroy unneeded capacity and to put the unfunded liabilities out of their misery.
I would say 1-2 Billion unfunded are going to have to go right at the start and probably a few billion after that over longer term.
I am waiting on these people that believe in Helicopter Ben to start getting on their hands and knees praying for the helicopters to come, I am surprised they don't have temples for worshipping these famous helicopters.
Each and every time a nation has been faced with this mathematical inevitability, it has defaulted.
Deflation will slash wages and production. Then scarcity sets in but the rich will outbid all others. Really, South America is instructive - high joblessness AND high prices. That is the way it is in most of the "developing" world and that is how it will be here.
Just because you don't have a job or any money, don't expect someone to sell cars for $100 again. Prices didn't fall when production moved to China despite the labor savings.
That is what the Z1 is showing, a default of or on the system or how I would put a collapse of expansion. You and your country men have been defaulting for over 2 years by not supplying the equation, of course it's an impossiblity long-term, usually 60-80 years.
Don't worry, you won't be around the next time the system collapses, the cycle is longer than a normal human beings life span, you will only have to go through it once.
I don't expect cars to go for $100, production will go to near zero in auto manufacturing, this ain't going to be as nice as the 30s and 40s.
" this ain't going to be as nice as the 30s and 40s."
moral decay cannot be factored into any stats.
the last depression at least knew some form of decency.
this depression is accompanied by a complete lack of leadership, a lack of virtues and a lack of comprehension for the most basic of facts.
on the other hand.. millions of mindless uneducated drones might just stay at home, on their couches, watching their soaps and believe each and every word coming out that box that's packaged and sold as news or information.
we just might be that lucky that the masses will not really care as long as their power doesn't go out and their fridge remains somewhat stocked.
hopefully Ben et al know when to stop and they remember to put the cheques in the mail .. or all bets are off !
I watched CNN for the first time in 2 years and they spent an hour on Lindsay fucking Lohan. And another hour on some federal agricultural official who was fired for saying something 24 years ago (allegedly). I mean, who really gives a shit about this stuff? Who?? CNN is pathetic. I was in disbelief. I really, really hope people don't watch this on a regular basis. We are screwed.
"Inflation or deflation?" Oh, that´s simple. First deflation, then (hyper)inflation.
whoops, you forgot the time line.
Depends on how much more will be printed. But, I´d say 0-4(5) years from now deflation, 4(5)+ years inflation.
Are you considering that housing crashed in '05? Because then it would have already been 5 years of deflation. And I am with you on the time line, but I start mine in '05. Let the doelarr debasment continue vs. oil and vs. PMs!
excuse me.
oil at $147 was NOT deflation.
we had years of inflation starting in the Eighties with the massive expansion of credit and liquidity.
the credit expansion is fizzling out everywhere including China.
what happens next is NOT inflation..
I tend to agree, but the time line is difficult to call. You can only have falling tax revenues coupled with rising government spending for so long before the bondholders start to see that they won't be getting their money back.
^^^^^^^^ !
@ kaiten
"Inflation or deflation?" Oh, that´s simple. First deflation, then (hyper)inflation.
Bingo!
Finally. Someone - other than me - with evidence of a fully functioning frontal cortex.
"Inflation or deflation?"
Ask Paul the octopus...
Ina Double Whammy Economy, the "pain threshold" for inflation is way lower since incomes are down and small business margins are depressed. So the Fed can't really inflate too hard without political risk
Animal Spirits (Spiritus Animalis)
Very simple:
When the world says deflation is coming, prepare for inflation, when inflation fears are peaking invest for deflation.
Ahh yes inflation debtors win, but banks lose right? In an inflationary enviroment the banks books stuffed with 30yr notes at 5% will take a major haircut.
Is it the governmet vs. the banks in this show down?
banks are levered! Look at 2008...a little deflation and nearly ALL of them went BK simultaneously.
deflation helps NOBODY in this system. The banks NEED inflation.
Hyperinflation is at once and always a currency crises.
The current economic climate has both deflation and inflation present.
Eventually monetary easing/debt loading leads to inflation holding sway, where everything seems good as everyone is richer. This precedes the "crack up boom" which occurs fairly rapidly, immediately followed by a massive loss of confidence in the currency and hyperinflation.
End of currency in question and anyone's wealth held in that currency.
Got gold biotches?
"crack up boom"
cracks me up every time I hear that.
what was the housing bubble bursting other than one gigantic crack up boom?
people felt "richer" because of their sudden and magic equity build up in their houses.
everyone "in the game" was rich and the banks gave credit against that sudden richness. that's why we got this sick leverage we have today.
ok, so make your case for the next "crack up boom".
imo we're in the crack up bust. there's not much faith in any fiat currency but nobody is yelling "fire" in the theater.
we're burning down as we speak but so far the allegiance of fiat bankers is sworn to fight this fire with fire.
yes, got gold and getting more. gold does well in deflation.
+1
The hyperexpansion to $1.6Q is disregarded in (nearly) every discussion.
Hyperdeflation, here we come!
There is a big deflationary undertow. It seems we're at the beginning of a double dip which will frighten the fed and prompt QE 2. We'll probably begin to see real inflation if this happens. Hyperinflation, if it happens, probably won't occur until money has to be given directly to people for services.. policemen, military, etc. We're probably a year, year and 1/2 away from something like that.
inflation to teh owners of teh fed
deflation for the rest of us
If we do another QE, it'll be Boobflation one more time for Hollywood's young and infamous!
http://www.youtube.com/watch?v=9PR_rzF8ofw What?? It's been a few weeks... :)
And tomorrow we find out if BS will have Hamponites using 1,000 doelarr bills or 100,000 doelarr bills.
100K doelarr doelarr bills y'all!
And the new hit single from Wu-Tang: "Cash rules everything around me CREAM get the money, hundred thousand doelarr billz ya'll!"
Diversify yo Bonds!
"Inflation Or Deflation?"
Bet on both and you can't lose.
Your avatar always stops me dead in my comment-reading tracks...it normally takes around 10 bounces before I can continue reading. Thanks!
Welcome!
Based on his avatar I would say....... Bouncing HyperInflation
"Governments will find that they are unable to restrain themselves from printing ever more money in an endless wave of uncontrolled emission. At the same time, rising taxes, commodity prices, and costs of all kinds, coupled with a rising overall level of uncertainty and disruption, will curtail economic activity to a point where little of that money will still circulate. Inflationists and deflationists will endlessly debate whether this should be called inflation or deflation, unconsciously emulating the big-endians and little-endians of Jonathan Swifts Gulliver's Travels, who endlessly debated the proper end from which to eat a soft-boiled egg. The citizenry, their nest egg boiled down to the size of a dried pea, will not be particularly vexed by the question of exactly how they should try to eat it, and will regard the question as academic, if not idiotic."
Dmitri Orlov
http://cluborlov.blogspot.com/2009/12/predictions.html
Deflation its here its now. Its what happening.
Tau Jones 11,200 was not deflation. I don't know what it was, as I think this whole inflation/deflation debate is passe, but it was not deflation.
A critique of Larry Summers providing a more sensible take on the relationship between debt and inflation:
http://www.nakedcapitalism.com/2010/07/the-summers-of-our-discontent.html
The inflation-deflation debate makes one weary. Obviously, day-to-day trading strategy involves inflation trends. Long-term trends are much different. The fuel for the central bank’s engine is fiat money. And the very definition of fiat money is inflation.
The creation of inflation over time is designed to change the value of currency for the benefit of the oligarchs, the cartel owners who operate our financial system. That’s the reason the cartel doesn’t use sound money.
And that’s the reason they fought, cheated, blackmailed and lied to obtain the printing press, safely operating inside their closed doors.
With fiat money, the cartel can lower its costs before the inflation comes in. Says Ron Paul writing On Money, Inflation and Government: “The power to create money is a power that should never be granted to government…
“Wall Street made a killing during the housing bubble, reaping record profits. Now that the bubble has burst, these same firms are trying to dump their losses on the taxpayers. This approach requires more money creation, and therefore debasement of all dollars in circulation.
“The Federal Reserve, a quasi-government entity, should not be creating money or determining interest rates, as this causes malinvestment and excessive debt to accumulate.
“Centrally planned, government manipulated economies always fail eventually. The collapse of communism and the failure of socialism should have made this apparent. Even the most educated, well-intentioned central planners cannot plan the market better than the market itself. Those that understand economics best, understand this reality.
“In free markets, both success and failure are options. If government interventions prevent businesses...from failing, then it is not truly a free market. As painful as it might be for Wall Street, banks -- even big ones -- must be allowed to fail.
“The end game for the policy of monetary inflation is that the money in your bank account loses purchasing power. So, by keeping failing banks afloat, the Fed punished those who have lived frugally and saved.”
The point is, we have a recession and a war and massive government “stimulus” and the financials have a healthy Dow Jones average where they make money. Why is that? It’s because of inflation; they use savers’ money and tax money (including the inflation tax) to leverage and pay it back later with fiat money (when they’re not using toxic bucks). It’s an old hat trick they've used over and over. So where does deflation come in? Deflation is where you hide your long-term inflation trend. Deflation hurts the cartel so they weave inflation into it as quickly as possible; they’re game is inflation.
Inflation or deflation? Who cares?!
There is no law, no justice, no change, and certainly no fuckin' hope. All we have is a friggin' argument about which way the world is going to end.
There are only two things that will make me feel better; (1) A regional (changed from worldwide) EMP that wipes out all of the co-located HFT servers in NY/NJ and (2.) A spike in US treasury yields which triggers a interest rate swap/JPM meltdown. Ah, the thought sends tingles down my leg :-)
Yes, but not necessarily in that order. The Fed will tolerate only a short period of actual, bona fide, reported deflation. Then all stops will be removed!
The jury is not out.
Some things will inflate and some things will deflate.
The bull is over for the old asset class and those items will deflate (property, bonds, etc)
and other things like food and energy and gold will (continue to) inflate.
Easy.
I think the dollar is going to break one night and we are going to go straight to chaos. No inflation - no deflation, just chaos.
Fair enough, but how? Because some who-dee-do country dumps the currentsea? Well even though this is hot potato, and no one wants to be the last one holding the doelarr, they also want to milk this thing as long as possible.
milk this thing as long as possible
I think the milk is running dry. A street kid was begging for money and I had a dollar bill from a trip abroad. The kid would not take it!
blaa blaaa blaa blaa
(Britney Spears voice):
not complicated ya'll
asset (RE,Equities) Deflation
everything else (CRB,DXY) inflation
Deflation will continue to prevail if the debt defaults continue, which we should all encourage. I really doubt that we'll see devastating deflation, not unlike what Japan has seen for the last 20+ years, or is it nearing 30 years?
Get it America? You better be writing your congressman daily and telling everyone you come in contact with to vote this regime out of power. I don't mean just Democrats. I mean we need to get the whole gang out of there. These crooks can not be allowed to stay in office.
Come on America all you have to do is tell 5 of your friends about your concerns. We need to be electing people to office who are not seeking power, but rather "report to nobody", but a free, prosperous and safe America.
It's not that hard. You can't have inflation in an environment of declining credit. Even if helicopter Ben buys assets and provides lenders with as much liquidity as possible, if money does not get into the hands of borrowers then inflation stops in its tracks.
If all that liquidity makes its way into the commodities market and specs run the price up of oil to $150/barrel, people seem to forget the inconvenient aspect that people without jobs can't pay. Then what? Prices drop back down to levels that are supported by labour output. Inflation means an excess of cash in society. Recall the stories of carrying wheelbarrows of cash to the grocery store in the Wiemer period. Right now we have the opposite. Nobody has enough cash. The dollar is in demand.
If by inflation we meen to say more money chasing the same amount of goods, and by deflation a decline in price levels, which were previously sustained by expanding credit, then it seems both arguments exist quite harmoniously. Fuck the police!!!
The dollar is done.
Peter Schiff:
http://www.youtube.com/profile?user=SchiffReport#p/u/0/cssWSZY-B2Y
i don't think inflation will reach hyper...banks have to be forced to flood the economy with money. they didn't last time and they won't this time.
extra cash that was pumped into banks, last print job, went into filling holes that CMBS and MBS left. hence banks now recording below average profits for q2.
the fed will be reluctant to finance banks again.
obama will just have to keep raising the debt ceiling for fiscal stimulus. thats it.
total FUBAR
Deflation or Inflation?
You can have both: deflation in assets and then all of a sudden, a run on the banks.
That's how it usually happens. Right after a deflationary period. One key factor: people lose their confidence in the currency.
http://www.youtube.com/watch?v=1ltdMp_lh8s
Well you better get 10 dollar a barrel oil, and to do that would require some immense find - not the BS deepwater drilling or the tar sands.
Also, how TF are taxes going to go down? We pay 60%. Govt. spending is insanely asinine.
I'm stuck in the deflation camp doesn't take into account that everything we eat and use is a byproduct of oil, and that every govt. on the planet is broke and charing us out the ass in taxes.
40% left over to pay fixed mortgages and car loans.
Deflation is a fucking myth and when these morons kill the value of the dollar the deflation camp is going to get wiped off the map of reality.
Will The Long Bond Collapse?
According to this sketch of weekly /ZB futures, there is a possible Gartley Bearish pattern soon to conclude. If prices nosedive, I would expect inflation.
http://www.screencast.com/t/ZThlOWZkZDgt
We could still have asset price bubbles in some commodities like crude along with deflation though couldn't we?
We have had deflation for some time in wages, real estate, food prices and costs of a lot of goods and services but it has been hidden to most Americans by the sharp rise in the dollar. If the dollar continues to drop then the deflation will become more apparent.
We are either going to have deflation or stagflation (high inflation / high unemployment / weak growth).
Good old inflation is really imagiflation.
Conflation: the grifters get away with it
Incarcerflation: orange jumpsuits, all around
STAG[NATION] + IN[FLATION]
true, it is in the banksters pockets...but inflation will be here when bond interest rates are bid up
I'm seeing hidden hyperinflation via quantity and/or quality downsizing. Same price, you just get less. Coffee cups reduced by a quarter inch, mayonaisse reduced by a quarter inch, apple juice cans are now smaller, wooden matches doubled in price, grade A orange juice up 87% at ---mart ( same stock ). A cake had lacquer listed as one of the food ingredients. Your getting less for the same, that's why it doesn't show up in the numbers.
That's exactly what to watch for. The coming food crisis will bend the knees of many (including entire nations).
TPTB?
"Stagflation" is when you have inflation and deflation at the same time, along with high unemployment. We've had it before, in the 70s.