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Weekend Poll: Buffett Or Gross - Inflation Or Deflation? (Or Neither)
Submitted by Tyler Durden on 08/14/2010 12:08 -0400
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Option 4.
The banksters have broke the house. The casino will shut down.
Perhaps around the bottom like 1933 Banking Holiday and 1968 Paper Crisis, 1941, 1987 and various August crash closings...
http://www.chronos-st.org/NYSE_Observed_Holidays-1885-Present.html
http://stockcharts.com/charts/historical/djia1900.html
+1, I didn't like the choices presented so I didn't vote. I'll agree with your take, as long as gold is a need :)
I voted for "passed the point", expecting to be in the minority to inflation.
In other words...
Scroomed, bitchez!!
Same. It's like actually caring about what asshole Cheeky thinks anymore. Ain't gonna change a damn thing whether or not I've been signed up for more than a year or not.
MASS STARVATION BITCHES!!
Here chicky chicky chicky!!
LMAO
Ah,
The sweet call of the town square pigeon hunt.
I voted option 4 (We're screwed no matter what), as that seemed like the best way to describe our predicament.
More comments below if warranted!
I vote for De-stagflation. We have reached a point where deleverageing the credit bubble will take a decade or more. This provides pressure on rates nominally, but inflation can easily run at 50% premium, say 5% inflation to 2.5% on the ten year. The Fed can manage public expectations if inflation remains in the mid single digits regardless of where rates are headed. So things don't need to change much, if at all, for this to happen. It means more pain for savers, and new programs for the unemployed, although the unemployed don't use much gasoline, or drive anywhere. This will destroy certain aspects of the consumer society, but a drive through Wedding in Vegas will be an act of conspicuous consumption. The point of all this to gently tamp down consumer demand. On a fiscal note, several countries other than the US already run their CPI higher than their comparable fixed income yield. The problem isn't some macroeconomic groundswell of change, its what is going to happen when nothing changes, status quo. The train is headed down the tracks right at us, and we haven't budged.
Andy,
but he's making that super-preferred return on those warrants, what 18%?
So now we see WB's pro-O stance. On one hand he says "O doin' good," on the other he criticizes each and every policy.
But if GE, GS, Burlington Northern all get unfavorable regulatory treatment, he's screwed.
and he has those 2018 index short puts hanging out there.
- Ned
and marked to market quarterly without collateral, thus reducing BRK credit rating and facing a possible cash margin call under the new FinReg, unless the visit to DC with 0 negotiated not with another personal Executive Order equivalent like Paulson, Rostie and Wright...
You missed the boat a little boat. Warren isn't buying today and looking to unload a month from now. Has he ever sold any of his Coke stock? GEICO? Remember when people were worried that Warren was trying to corner the silver market? And even he'd agree about the 10 year time-line you mention. He has said repeatedly that the bigger Berkshire gets, the harder it is for him to find worthwhile investments.
Agree.
But think about how Gross is long because he cannot sell, i.e. unload his bonds.
Compared to him Buffett's position is idyllic.
Howzabout deflation near term and some day, don't know when, "V" (as in MV=PT) pops, what with all the high powered reserves in the system, inflation. Then, coupled with the increasingly burdensome tax and regulatory regimes, we finally wind up at the Post WWII British Stagflation model.
So, all of the above.
Debt is deflating, money is inflating. Things that are bought with debt or on margin are falling in price (stocks, expensive gadjets, homes), things which are bought with cash are increasing in price (food, energy, gold).
Since the dollar is sort of an in between state of money and debt, we have an overall wash in terms to dollars. The dollar is balance on the edge of a knife right now, and the longer we stay there, the deeper we will be cut. We are better off falling to one side or the other, but the Fed and TPTB fear that, so they are doing their best to keep us here, but their efforts will eventually topple us off and into the deep pit of hyperinflation (possibly lined with stakes), rahter than the shallow one of deflation.
In the meantime, stagflation, just like in the 70's. This will end only with a currency crisis, only this time, we can't escape by raising interest rates.
I agree. The inflation is already happening although it is not officially recognized. Meanwhile interest rates are so low that there is no incentive to save. The economy is at a tipping point, and falling to either side may result in hyper inflation. If the economy shows real signs of improvement, velocity will pick up. If the economy deteriorates, people may panic and dump their devalued, non-interest-paying FRNs for tangible goods. Inflation is the easy answer and it is already happening.
edit: I think too many people overlook the herd mentality panic factor because it has been avoided so far.
I dump my FRN's every payday. Food, ammo,feed,etc what ever is left pm's. I don't invest shit anymore.
"I dump my FRN's every payday. Food, ammo,feed,etc what ever is left pm's. I don't invest shit anymore."
-smart move, however you incorrectly state that you don't invest... but you are buying PM's... an excellent choice of investment/preservation of wealth. :)
BTW, I couldn't agree more with the food and ammo. For suburbanites like myself, non-hybrid seed for atleast 2 acres is also a must for coming times. Its a two hundred dollar insurance policy against starvation.
+1. We'll have hyperinflation when the dollar is worthless
"The inflation is already happening although it is not officially recognized."
You're confusing inflation with rising prices in certain category of goods. Inflation is rising money supply relative to goods and services available, definitely not happening now.
"Meanwhile interest rates are so low that there is no incentive to save."
Yet personal savings rate is rising... Which is perfectly logical since households and businesses are deleveraging.
"If the economy shows real signs of improvement, velocity will pick up. "
Velocity won't pick up as long as aggregate demand is falling. Aggregate demand is falling because households and businesses are deleveraging : aggregate demand = GDP + change in debt (which is negative 800 billion compared with positive 5 trillion in leveraging time, so a delta of almost 6 trillion on demand so no surprise velocity is falling off a cliff).
"If the economy deteriorates, people may panic and dump their devalued, non-interest-paying FRNs for tangible goods."
True, that's why during deflation there is a heightened risk of currency crisis: aggregate demand is falling off a cliff, this causes tax revenues to fall off a cliff, if government can't reduce its expenditures accordingly, it becomes more and more obvious to investors that government is becoming insolvent. This causes investors to panic, sell bonds and convert fiat into useful goods. Hence demand for goods and services suddenly picks up unexpecdedly in a depressed environment and causes a currency crisis.
"Inflation is the easy answer and it is already happening."
Nope, deflation is the easy answer because the change in debt went from +5 trillion to -800 billion and that's what impacts demand for goods and services more than anything else. Having said this, as long as we will have deflation there will be a risk of panic and systematic break down, ie hyperinflation.
"I think too many people overlook the herd mentality panic factor because it has been avoided so far."
Correct.
Bravo! Bravo! You have it right! Why do so many people think a nickle rise in gasoline is inflation while their home value dropped 35%? Deflation = declining credit + declining asset values! I would rather pay .10 a gallon more than have my homes value drop by 10%!
"Debt is deflating, money is inflating." + "in the meantime, stagflation, just like in the 70's."
conclusion:
YOU
HAVE
NO
CLUE
No, my dear, I have every clue, and they all point in one direction. Gold is the only asset that will come out of this situation ahead.
The situation is complicated only because the Western banking cartel has created a complicated world system. Demanding a one-word explination for what is happening is childish.
"Gold is the only asset that will come out of this situation ahead."
I don't know if it will be the only asset that will come out ahead (agricultural land will also do good) but I agree that as long as we are in a deflationary depression Gold will be better than cash, bonds, equities, and most commodities.
This is because a deflationary depression will increase the risk of cascading sovereign crises all around the OECD.
I agree the situaton is complicated and very unique : debt deleveraging of this magnitude coupled with a money printer at the helm of the Fed increases uncertainty. But there is no doubt that we have entered what is going to be a very long and painful deflationary depression as long as households and businesses continue to deleverage. What's unknown is the reactions of TPTB who are completely blind and risk to delay or cause a global systemic crisis in their search for an unlikely exit scenario.
Demanding a one-word explination for what is happening is childish.
I agree. And, this is why so many people can't grasp what's happening, coupled with the widespread, persistent and deeply-held belief that the expansionary monetary regime which has existed for the past 30 years will somehow continue.
Well put.
Deflation occurs when people believe that if they delay a purchase, they will get a cheaper price in the future. This is predicated on the belief that one has confidence in their currency (and has access to their money).
In the current case, the Fed's diddling via QE and the banks lack of lending has distorted market mechanics. As a result, deflation is occurring due to lack of available credit and not due to the hope of cheaper prices.
Hyperinflation occurs when the public loses confidence in the value of their currency. As long as people have confidence that their currency can buy stuff, there won't be hyperinflation. However, when the run on the USD occurs... and it will, people will be looking to take their money and lock in value by hoarding tangible assets.
We are slowely starting to see bifurcation occurring with deflation in assets (think housing and dropping consumption) and inflation starting in specific food stuffs (wheat based products, grain fed meat and milk products)... and if you don't believe me, go to the supermarket and compare price increases over the last 2 years.
Get ready...
Bingo! My thoughts exactly.
In a globalist world where the baton gets passed on from one Imperial Empire to another, it's likely the US will be left choking on stagnation whilst another Anglo imperial nation inherits the spoils.
I'm usually in the deflation camp, but I couldn't bring myself to vote with Bill Gross.
Deflation??? I understand prices for a few items dropped temporarily, but long term deflation is not possible when you print money... which many have stated here already.
There is a gap between money supply and goods available... making people argue that we are in a deflationary death spiral. I like to think of it as more bang for the buck.
You are a brainwashed idiot if you think any inflation is good. I would prefer zero years of inflation and an infinite years of deflation.
Real Deflation means we all get to enjoy the fruits of our labor cheaper.
The bullshit argument that the fed sells and everyone believes... is that deflation is bad for everyone. Nope, deflation is bad only to a debtor society and its moronic government. For savers, producers, investors... its great. For people with massive amounts of debt, loans, etc... inflation is a boon.
Deflation is actually good for the real economy(production of goods and services)... it reflects an increase in efficiency/productivity. e.g. A plasma TV cost a lot less 2 years ago than it did 10 years ago... a reflection of the free market producing in a manner beneficial to more people.
Now, the decrease in asset prices(e.g. real estate) is causing havoc on balance sheets of powerful bankers requiring further dilution of the dollar by the fed so that these fuckers don't all end up bankrupt and actually have to start earning an honest living... Quantitative Easing has a simple goal. When you create a bubble in one asset, it causes turmoil when it eventually crashes... there is only one simple way out... you inflate everything else to catch up to that falling asset class. The problem is that new bubbles form as a consequence of this easy fix.... causing more problems down the road. Ultimately, we create more problems than solve. This hurts the country as a whole, instead of a few lousy bankers with no real productivity.
It amazes me that people are intelligent enough to come to ZH, but some are too dumb to grasp simple concepts.
I voted for the... it doesn't matter anymore camp!!!! Hyperinflation is going to become very real for the simple reason that so many sheeple bought the deflation is bad bullshit and allowed the fed to devalue the dollar for so long... basically, since the fed was created. Unfortunately, the pace has accelerated to such a rate that it will simply be unmanageable.
When the inflation-is-good scam finally unravels, there will be a massive loss of confidence in the dollar and fiat currency from so many places that we simply will not be able to hold the dam back any further. Why would anyone want to hold dollars for longer than they had to... if its worth less tomorrow that it is today... its best to spend it today on something you will use tomorrow.
I am not in the gold is everything camp, but I definitely think gold is an excellent asset to own for inflation and store of purchasing power...its not really a great investement as there is no productive return in physically holding gold. However, there is no single better preservation of wealth than gold on this planet. Not even silver. Silver supply outstrips demand. There is 10 times more silver production yearly than gold. Silver production continues to rise yearly, however gold production is falling yearly.... this explains why the gold/silver price ratio is growing. It is simple math. That reversion to the mean with gold/silver price ratio back to 10-1 will not occur as long as silver production continues to grow at astronomical levels. Still, silver will hold value better than a fiat currency. (I hold both physical gold and silver)
In this race by all the countries to debase their currencies the fastest, playing one currency vs another is simply timing and gambling and beyond my capability. I admit that I have no expertise on short-term trends or making stellar returns in a short time. I have and always will continue to invest (notice, I didn't say trade) in a way that makes sense. Let unreasonable sheeple make choices based on emotion, trends and the fancy of the hour.
For those smart enough to trade instead of invest in the short term...go for it. For those that know the game is rigged against us in the short term, I recommend investing and changing the game plan accordingly.
Good post!
We are less than 3 months before major congressional & state elections.
Incumbents in the both major political parties are looking for their reelection preserving some sort of improving economic status quo by keeping
Following the election, based on the election results, we have a very unpredictable political situation and a paralyzing gridlock in the Congress. At this time, all bets are off.
Nevertheless, regardless of a party affiliation, everybody (politicians and their Wall-Street masters as well as general population) are afraid a deflationary economic environment. Therefore, everything will be done to prevent a deflation.
Conclusion: an inflation is inevitable.
In an atmosphere of gridlock, additional laws are hotly contested and difficult to pass. In such a situation, I'll posit that stimulus spending will be a hard sell. It will be very easy to extend immediate aid such as EUC, foodstamps, bailout of states (with a haircut), etc. It will be very difficult to pass anything remotely nearing TARP, et al.
All of the political winds in this country are for austerity. This ultimately means cutting back domestically to pay our international creditors and/or creditors holding particular debts of the country.
You have a country that is increasingly willing to go a different route, whatever the consequences may be.
Yes, we are afraid of the inevitable deleveraging process. But, we are also mindful that our stimulative efforts have done little but raise the prices of our groceries and gas. When the stimulus efforts are not believed to work AND make it more difficult to implement austerity, they will not be willfully chosen. In short, toto has pulled the curtain away at this point. Further, the administration, etc., who have been touting the economic recovery are now painted into a corner and cannot implement new stimulus without admitting they are lying.
The present plan is to pay off the banks with more valuable dollars than were lent, while at the same time reducing the size and scope of the government. We'll see how far we go before quitting.
Macho, what do you mean by "pay off the banks with more valuable dollars than were lent"?
Think of it like musical chairs. Once the credit contraction begins, some of the money supply is going to be turned in/evaporated. The more rounds of musical chairs you last, the more valuable the dollars you will be repaid with. The assets of the lame banks are fed to the healthy (larger/more politically connected/more systemically risky). Each successive round of consolidation makes it more difficult to break up the TBTF as well as ensures that they are closer to being going concerns.
In other words, a deleveraged 2015 dollar, with the plan going as planned, is going to be a helluva lot more valuable than a 2007/2008 dollar at the peak of the credit bubble. It's also necessary to keep our international creditors (wolves) at bay. You just have to be lucky enough to withstand a few rounds of musical chairs. And, even if you cannot withstand the pain as an organization, your principal actors have been siphoning off money along the way and can pick up the scraps on the cheap.
The ayes or the eyes?
Rather be rich than right.
Correct choice perhaps all of the above at different times...
Stagflation, the best of both worlds! Hey, has anybody else had a Hasbara rat put in a password change request, just because you didn't think Israel-firsters should run the US government?
Happened to me today. Amazing somebody would waste their time like that. It's a perfect example of craziness, and exactly why I feel these people cannot be trusted making th best decisions for America!
what the hell are you talking about?
Now see I love Billy Grows, and someday he will be Fed Chief, or Treasury Sec, because Bonds will be the investment vehicle in this century, the way stocks were the last centuries big thing, and BG is the bond man. He's also reasonably forthright. Deflation is propaganda, as someone here mentioned, and Gross is just parroting that, to scare all the little ducklings into buying UST. Bob Prechter posted his latest Theorist, an interesting piece about cycles, and his view that the stock market will bottom in 2016. He also makes the Japanese deflation case pretty well. The lost decade. Say goodbye to stocks and hello to bonds. If you want to give your kids any advice, follow Mr Gross, he is going to be an important player. (like him or not)
Prestidigiflation (1984, Bitches!!!!)
Like history in Orwell's 1984, the inflation numbers will be continusously revised by the economists at the Ministry of Truth. Thus, there is really no way to know if the pea is under the inflation shell, or the deflation shell, until well after the magic show has ended, and the magician has taken your money.
Exhibit #1: The Fed claims it can no longer afford to calculate M3: http://seekingalpha.com/article/94635-stagflation-or-deflation
Good luck trying to decide between inflation, deflation, or stagflation without M3 when, "Inflation is always and everywhere a monetary phenomenon," per Milton Friedman.
Exhibit #2: Inflation revisions fail to be orthogonal to past revisions, indicating bias by the publishers of the data set (duh): http://www.cluteinstitute-onlinejournals.com/PDFs/2004154.pdf
The Fed and Treasury can manipulate the markets to the extent that black is white; inflation is deflation; and ignorance is strength. Good luck trading in this environment.
Inflation? Deflation? The only way to win at a shell game is to not play. Disintermediation.
The only way not to play is to not have money to play. But since we all have money, we are all playing, either passively or actively. Not to act, is an act in and of itself. If I was an intellectual I'd say: "You can't not do nothing".
I do not advocate inaction, only disintermediation, that is the removal of banks as intermediaries to investment. As an example, one can buy a property with cash, and without an agent, and be a landlord directly. It used to be the case that one needed to be very, very wealthy before really needing the services of a bank.
All nice and dandy. But then how would the money master scrape their 30% cut off of our labor? I see you and Cog Dis went to the same rational school of thought, you are indeed both bad for business... ;)
Bad for the business of the looter, maybe. Good for the business of the producer.
www.Shadowstats.com (2010 Bitches!!!!)