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We're On the Cusp of Another Round of Deflation
I believe we’re on the cusp of another round of deflation.
Now that the Swiss have pegged the Franc to the soon-to-be-broken-up Euro, the US Dollar is now the primary “flight to safety” paper currency for the world. With that in mind, we need to consider that the greenback appears to be forming a massive wedge pattern:
This pattern predicts a possible target of the mid-80s. Remember, the last two major US Dollar rallies were caused by Crises (2008 and the Euro Crisis of 2010). So if the greenback explodes again here, it will be based on another round of deflation/ systemic risk.
However, in order for us to get there, we need to take our resistance at 76:
This is the line to watch. When we take out 76, the financial system will be in BIG TROUBLE again.
Indeed, I fully believe that the financial system is now more in danger of systemic collapse than at any point in history (including 2008). Do NOT be fooled by the rally of the last few days. We saw rallies of 8%, 11%, even 17% during 2008. Those investors who bought into them got taken to the cleaners.
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Sorry, but like the mainstream parrots so often say of gold, I cannot eat equities, nor does my car run on real estate. Nobody MUST own stocks, bonds or other paper assets, but everyone MUST eat and use gasoline to survive.
Again, you refuse to face the fact, you deflationary troll --- there is NO such thing as an APPRECIATING fiat currency, never has been and never will be. That is all that needs to be said to deflate your ridiculous and/or disingenuous deflationary argument.
I grow more and more convinced that anyone still spouting the intellectually insulting and historically ignorant deflationary line is just a shill and paid minion for the financial and political elite. I have a hard time imagining ANYONE, at this juncture, being that naive and that honestly ignorant.
Now were on to name calling... struck a nerve did i... Here is the one flaw in your non- APPRECIATING currency theory. Never before was there credit in the system like there is today creating the illusion of inflation... so history is being made..not repeated.. this credit is collapsing faster than benny can print... When ben has printed 100+ Trillion dollars we can begin to call it real inflation... but for now..while the debt bubble is collapsing... its deflation via credit collapse...
I am having a bit of a problem with your statement..."Never before was there credit in the system like there is today creating the illusion of inflation..." because inflation created by credit is just as real as any other kind, meaning the printed legal tender fiat. According to the laws of economics at the most fundamental level money has only three requirements, and money is not created when someone prints up something they call money, it is created when anybody anywhere borrows/lends. In other words credit creation is the creation of money, but paying off a loan is not the destruction of that created money, only by removing from circulation can money be destroyed once created. There really is only one way to do that in a debt based economy, default on the credit.
The reason for stagflation or as some of you like to put it Bi Flation, is simply that most of the money is in the hands of a very few while the masses of people have too little to worry about either inflation or deflation. Until there is default on credit there is no collapse, what is happing today is a transfer from the many to the few not a deflationary collapse. Ben's printing would be meaningless even if he were to create the 100 trillion dollar bill, that is just making a finely engraved label for what has already been created. Some of us here like to call that monetizing the debts, but I try to keep shy of that because too many others think that monetizing debts is what is inflationary, or taking paper fiat out of circulation will solve all inflation problems. To be clear, when you or I default on a mortgage we are in effect creating a small chunk of deflation, multiply by millions of defaulters and you start to get a serious problem, but the central bank has so far made up for a lot of that by creating credit/debt and handing it over to bankers. They sure are not going to relend at a profit to people who already burned them on real estate, so they speculate in commodities that drives up the cost of living for citizens, and what should have been done was to create that credit/debt and mail a check to you and me and let us pay it to the banks, but the result would have been the same in the end, inflation, even when some categories of price have dropped, in the general economy prices are rising, fast.
I gave you a +1 anyway because at least you are thinking about the problem rather than sitting back and calling names.
Stagflation is defiantely what we exeriencing as the CB keeps printing money to offset deflation... the question is can they print faster than the debt collapses.. I currently don't think so given the size of the debt bubble but they have done some crazy stuff in the past so time will tell..
<<but for now..while the debt bubble is collapsing... its deflation via credit collapse...>>
<<Stagflation is defiantely what we exeriencing>>
Seems you can't make up your mind.
A mind is a terrible thing to baste.
But boy, those deflationary drippings sure taste good!
What we are seeing is Exter's Pyramid; simply put, the more an asset's value derives from credit/derivatives, the more its price collapses when FRB starts running in reverse.
No, sorry, the German Mark didn't suddenly appreciate in value at the end of the Weimar hyperinflation; Gono confetti did not suddenly appreciate in value at the end of the Zimbabwe hyperinflation; etc, etc.
What happened was eventually they lost ALL value and got replaced by a new currency. That is not deflation.
Again.. when deflation sets in becuase of the speed at which it does the currency ultimately collapses and becomes worthless becuase the system cant handle the stress... and ultimately that may very well happen to the dollar... but for now while the CB continuesly prints money to try and <b>offset</b> the deflation we find our selves in a cyclical deflationary trend untill the system collapses under the ultimate deflationary depression we have entered.
You appear to misunderstand the basics of what we're talking about.
Yes, in some respects, the money supply is shrinking. If we look at M3, for instance (no longer published by our beloved Fed, but still possible to esimate), we see contraction:
http://www.shadowstats.com/alternate_data/money-supply-charts
however, M1 and M2 are still growing (considering how much our economy has shrunk, the surge in M1 is particularly alarming). As illustrated by Exter's Pyramid, we see deflation in assets whose prices have been previously bid up unsustainably by the past decade's overly cheap money.
However... everything else is going up in price (at least, in terms of how many units of currency it takes to buy them). I don't know where you live, but my grocery/fuel/holiday/clothing costs have risen substantially. THAT is inflation.
<<Again.. when deflation sets in becuase of the speed at which it does the currency ultimately collapses and becomes worthless becuase the system cant handle the stress>>
This is like saying if you drive your car very fast into a brick wall it will evetually decelerate before it is totally demolished in the impact and the demolition was due to the instantaneous deceleration at impact.
Weird
I see you have finally been reduced to babbling pure unadulterated nonsense.
There is no arguing with an idiot.
Indeed
I think deflation is far more plausible than people believe it to be. People have to have money to spend in order for inflation to take root. I think the American consumer is on his last leg, blowing his wad these last two years with easy credit card money. Its possible that many of the people on ZH and people that care about this economic forecasting stuff have little idea of how the typical American lives-they live hand-to-mouth. When they have spent what they earn, and spent too much on credit, declared bankrupty and do it again, well, at a certain point the money flow, velocity stops or slows. They try to save in every way only to buy the necessities, when prices rise they move to something cheaper, they don't keep buying the inflated item because they can't, their finances are to the bone. In the current political and economic mess the endgame could be right around the corner and ugly, if the fat and happy American begins to feel the slightest hunger pang, a calamity will ensue.
inflation ratess for the low paid are really tough and the lower your income the worst it is. the policy makers don't see that as a problem, but i think it's one of the things tipping us over. it seems like we have massive inflation for the poor folks without assets and massive deflation for the folks with assets but everyone is getting it in the neck. apart from all those smug bastards that bought gold in 2005, god i hat them.......just kidding
People do not have to have money for inflation to take hold. Do you think the average Zimbabwean brought about hyperinflation because of his excess spending?
When a currency collapses, the holders of that currency still have to buy stuff that is composed of commodities that are bid for in a global marketplace. That includes the government of that country, which will be faced with plummeting revenues as economic activity implodes. That government is faced with a stark choice - watch its starving people riot, or print its way to paying its bills, thereby further weakening its currency.
Eventually the currency loses all value and it's monetary reset time. This has never happened to a global currency like the USD before; should be quite interesting (assuming we survive it).
"When a currency collapses..."
We're not there yet. It might pay to consider deflation in the meantime.
Except for the inescapable and undeniable fact that deflation has never occurred under a fiat currency regime.
"People do not have to have money for inflation to take hold"
Yes they do... unless you forget the pictures of people paying for loafs of bread with trillion dollar bills...
...you forget the pictures of people paying for loafs of bread with trillion dollar bills...
Exactly. What the Zimbabweans had by then was lots of currency, but no money.
My buddy who has no job told me that inflation is comming... I asked him how valuable a dollar is now to him as compaired to when he had a job... The light in his head immediately went on.... Deflation Bitchez!!
Ask your buddy how much that valuable dollar will buy him now? Can he get a loan for a house? How 'bout a car?
BI-Flation!
lol... the difficulties in getting loans is truely deflationary as it represents a lack of money to be loaned thus the money you have becomes more valuable to you. Sure prices on commodities have gone up and meaning that it cost you more dollars to buy stuff.. I get that... but if you dont have any dollars how long can prices go up before the company trying to sell those goods goes out of busniess becuase there are no buyers with enough dollars to purchase those goods. Thats defaltion
Agree. Rising commodity prices are not currently due to collapse in production, but from monetary policy gone awry. Such increases are temporary because production will increase in order to take advantage of high prices without thought as to the affordability of the finished products. That leads to overproduction, which is deflationary, and accompanying malinvestment, which is also deflationary.
Don't you mean "transitory"?
Gee, where have I heard this before, Ben?
Damn, the deflationary flat-earthers are really out in force today!
No, I mean TEMPORARY, like "We'll plant more of X next year and less of Y because X is up 15%."
Since you can't follow the logic, I guess all that's left is to change words to make a statement into something you can attack.
em in normal times you would be right but althought the sheople are being told everythink is going to be blue skies. no buissness leader belives the hype so are therefore unlikly to expand producktion, i'm sure we have seen evidence of this, might explain the miners?
uhm.. the greatest minds of the 14th centrury all preached the earth was flat.. and then it wasn't.. kinda of like today where the greatest minds are all worried about inflation.. until its not... wouldn't that make you the flat earth-er?
"Can he get a loan for a house? How 'bout a car?"
Or hamburger? Or as I said yesterday a peach perhaps?
Anybody know how to close the Effen Vodka pop up ad? It is parked over the comment text box and there is no X to close it.
Exactly wrong --- clearly, you know little or nothing of financial and monetary history.
The US consumer, or ANY nation's consumer, does NOT need to have "money to spend in order for inflation to take root". Prices will rise regardless, as the average American's wages stagnate and his standard of living falls significantly --- THAT is the face of the new inflation. Dozens of other nations have witnessed the same phenomenon in the last century, now it is the USA's turn.
Anyone still braying about the chimera of the "threat of deflation" is either a muddle-headed Precterite/Douchinger fool, or else a disingenuous and willful propagandist for the financial elite, spreading lies that only serve to deflect the attention of the average investor, and forestall his taking the proper financial action to protect his savings from the one REAL threat, that of currency depreciation if not outright monetary collapse.
I am stating the possiblity of REAL and lasting demand destruction, the likes of which we have never seen. The US and its central bank have been the lynchpin for rising prices around the world over the past century. What happens when the US economy, the center of it all, collapses, who will be the driver of higher prices, where will the demand come from? BTW save your guised name calling for someone that you know.
The fifth rule of fight club is: don't take things personally.
Some posters are quick to label those they disagree with as trolls, or worse.
We will I think get a more pernicious version of what we already have, asset deflation (falling house prices) and rising consumer prices in spite of the lack of money (access to credit) in the pockets of the consumer. Even if we do get stable or falling prices in nominal terms we will see no benefit since incomes will be falling even faster. This is what happened in the depression according to my grandfather who remembered it well and was scarred for life as a result. There was plenty to buy, and a lot of it was cheap, but nobody had money to spend and those that could have spent refused because they were terrified of losing their jobs, or the bank closing and taking their money with it, we have an FDIC now for what it is worth, but the fear today is very much analogous to that era, thus we see people buying bonds for their perceived safety even when real returns are negative, they are less worried about return on principal than return OF principal. We found money stashed all over the house when Grandpa died, a twenty here a fifty there, several thousand dollars and some quite imaginatively hidden, he never trusted banks again.
As to taking personally the rude comments of nasty moron breeders like the dog fellow above, one should take it as it was meant, a personal attack that requires we at least point out that nearly every homophobe is actually a closeted gay even when they deny that fact.
Yep,
Take a look at the M2 money supply. It hasn't increased that much. That is why they call it a Balance Sheet Recession. That is where all the so called printed money resides. No M2 money + High Unemployment = No Inflation. (for the time being) The Asset inflation we have been seeing is speculative demand.(for crying out loud: banks and Universities are buying gold) If consumers were buying anything right now we would have demand and rehiring, but they are not. Fear trumps everything these days. And when Europe collapses and fearful Europeans start buying dollars watch for [YCS] to go up.
DXY above 76...
Check.
http://www.goldseek.com/quotes/charts/usdollar/usdollarindex24hour.php
POSX over 77 already
opening scene: boring old economy with slow steady growth
cut to: a money supply in the hundreds of $ Trillions, job growth, factories, mansions, strippers ...
cut to: suddenly, all those hundreds of $ Trillions simply go 'poof' and disappear
cut to: (pick a scene from mad max / children of men / the road ...)
Road Warrior my favorite, I just hope theres no biker fags in assless chaps everywhere. Other than that, fine with me!
Funny how of all the posters at ZH it is always you who keep bringing up the images of laughable gay male stereotypes even when that is utterly bizarre in the context of what is being discussed. Why don't you just come out of the closet already? I mean even the idea of deflation in the economy seems to remind you of naked male asses, so why not get it over with?
Kind of like how almost every monetary and financial outrage of the TPTB puts Karl Denninger in mind of ass-raping, ass-reaming, "bending over", cock-sucking, etc. etc.
Not that there's anything wrong with that!