Guest Post: The Fed's Real Worry - A Pick Up In Deflation

Tyler Durden's picture

Submitted by Lance Roberts of Street Talk Live blog,

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
barliman's picture


Economist - derived from the latin Ikonomos - He who is ALWAYS fucking WRONG!!!

I think I need to buy a gun's picture


i mean who is kidding who

LawsofPhysics's picture

Exactly. When diesel is $1.00 a gallon, we can worry about deflation. No currency or society has ever collapsed because deflation. Morons.

daveO's picture

But, the thieveing bankers have collapsed! Tapering is smoke screen to slow down the gold buyers. 

RafterManFMJ's picture

Inflation in what you need to survive (gas/food/heating oil/energy) and deflation in things you can no longer afford anyway (new car, house, etc.)

In the new normal those who lose the least will be the winners.

Bay of Pigs's picture

Deflation? I saw a case (24) of Budweiser at $54 in a BC liquor store yesterday. Gas is $5.60 a gallon here too. And new car and housing prices aren't going down either.

Inflation is raging around the world.

Stuck on Zero's picture

The people who run government think deflation is when the assets of the billionaires go down in value.  That's what they worry about. 


Pumpkin's picture

$54?  You need to fucking move!

flyingcaveman's picture

Alot of tax in Cunuck land.  Buttwiper in the states is cheaper than water.

MeelionDollerBogus's picture

Ontario (also Canuckland) same product, $33.

tarsubil's picture

Vancouver grows money from pot.

Colonel Klink's picture

Yep, Buttwiper is shit beer.  Don't know why you'd even pay that.  Buy a microbrew with some flavor and body.  Fucking lawnmower beer sucks, pisswater.

Bay of Pigs's picture

Who said I bought it? Hell no Col...

daxtonbrown's picture

Smart people are overthinkig this. They believe only uber smart manipulation of the money supply can create wealth.

But the Federal Reserve and Central banks produce nada, zilch, zippo. In fact, if money is information (especially in it's current digital form) then ALL monetary intervention can do is introduce uncertainty (i.e. negative information) into the system.

In other words, Bernanke is ALWAYS pushing on a balloon, otherwise he would be a perpetual motion machine able to create free lunches out of thin air. So the only solution is fixed rules and/or gold (or bankers being used as Christmas tree ornaments on lamp posts)..

The reason you need free markets is to ascertain value on a dynamic basis founded on the real world. This is why ZeroHedge paranoia is right on the money. The problem is knowing the timing of the collapse is unknowable.

In short, what we have is a raisin muffin Biflationary Depression.

infinity8's picture

I agree but, I also hate raisins.

Milestones's picture

Thanks for posting that informative site.           Milestones

Seize Mars's picture

Ugh. Stop it. There is no such thing as deflation. It's not funny anymore, debunking this kind of crap.

To quote someone wise, noone ever fought a world war because of deflation. No society ever collapsed because of deflation. Ever.

Rustysilver's picture

Seize Mars,

I am not an economist, but, please tell me what was happening in Japan for the last 20+ years.

I understand that sometimes you don't have one pure from another.

disabledvet's picture

"a misallocation of human resources at both a profound and galactically significant level." it's hard to imagine deflation in the USA with the war effort such as it is...however...this is a rather paltry war effort effort compared to World War II. we definitely had an inflation then do to the massive production and energy consumption needed to "maintain victory." interesting in order to keep inflation up (barely) "the private banks signed off on massive amounts of quantitative easing for a decade." that was TOTAL war back then and included a draft which lasted until 1973. Japan has a massive mis match between productive assets and their debt. same is true for many countries in Europe as well. (remember Greece at 300 percent interest rates? ah, the good old days.) i think if there is any hint of Japan setting off a wave of deflation globally (knock on effects in Great Britain itself?!!! Russia??? South Africa?) then clearly the Fed will stomp on those rates "just in case." we'll see of course but i'm hoping yields on the ten year hit Japanese levels within say...six months.

WAMO556's picture

Uh, inflation?

One quadrillion Yen?

Everything costs more.

I was over there when it was 300 yen to the dollar and there shit was expensive. Now it is 100 yen to the dollar.

Can you imagine paying 10,000 dollars for some saki? Yeah, me neither!

Seize Mars's picture

Yawn. What has happened in Japan is the following: first, the spectacular bubble of the 80's/90's resulted in real estate prices that were insane. Since then the insane prices have come down to be simply crazy. The BOJ and the government have fought this price decline tooth and nail with every policy trick they can think of. Secondly, the cost of living is higher now than it was even back then.

So to answer your question, what they have seen is INFLATION. Inflation is the fake creation of credit.

If the price of stuff goes down in America, I will let you know. That would be great. No wars, no collapse. We would all be getting more prosperous. THAT'S NOT WHAT WE SEE. I see groceries and everything costing more. Society is coming unglued, you don't have to be a critical thinker to see that this country is on the brink. That's inflation.

The Japanese bubble was caused by the same thing that caused America's bubble(s): credit creation. Credit creation.


Paper Money--->Bubble--->Recession--->Stimulus--->Inflation--->Price Controls--->Shortages--->Riots--->Troops on Your Streets.


Dingleberry's picture

exactly. who the fuck are the retards caling for deflation? 

ponzisaurus's picture



There you are!

Where you been boy?

Havnt been chasing the neigbors cat have you?

robertocarlos's picture

I am one of them. We shall see who is right.

tarsubil's picture

The system continually creates money backed by nothing and charging interest. This gets expanded through fractional reserve banking and this gets expanded through ever higher levels of financialization of everything. There is never enough money in the system to pay off the debts due to the interest being charged up the expanding money system so it requires more and more. Sooner or later the system approaches the realization that there isn't enough money and banking and financials implode (kinda like deflation in 2008) but they will be bailed out with more money as needed (inflation since bailout/QE after 2008). I think deflation and inflation are both inherent in our system and once the bail outs reach escape velocity you will see hyperinflation as people lose faith in FRNs.

Bobbyrib's picture

Right now, we are seeing disinflation. The price of gasoline, copper, timber, etc. is coming down. There are certain expenses that are irreversible when their costs go up like taxes, tolls, and any other government created expenses. I think if Bernanke does not raise the amout of asset purchases (insanity), we will continue to see disinflation. The price of food and commodities could continue to drop, but to say we will enter deflation is a little too optimistic (it would actually help the economy).

tarsubil's picture

Gas is not coming down significantly right now. Real deflation in gas would bring it down to below 2 bucks like in the 2008. There was a brief period of real deflation in 2008 but the trend for the last 10 (and 100) years has been inflation in the price of gas.

Bobbyrib's picture


A slowing in the rate of price inflation. Disinflation is used to describe instances when the inflation rate has reduced marginally over the short term. Although it is used to describe periods of slowing inflation, disinflation should not be confused with deflation.

tarsubil's picture

Cool. Read you wrong. Sorry about that.

Iank35's picture

Ugh indeed. You have this the wrong way around.

Hyperinflation suggests that a government is willing to print money to pay off its debts.

When this stops working and no one is willing to lend to an inflating government any longer they increase taxes and seize the assets of their citizens...both very very deflationary.

In the 20's Germany didn't disappear because there were other currencies the Germans could get hold of to maintain some sort of an economy....likewise in Zimbabwe now. They have a black economy fueled by dollars.

People can work around hyperinflation but total deflation is the killer of empires. 

daveO's picture

Bankers kill Empires. They promote all the gov. spending funded by debt. Debt is what's killing this Empire, just like every other one. Deflation is just that debt going bad.

Iank35's picture

You're not wrong. As the cost of big government increases exponentially they, with the help of bankers (or bankers with the help of governments) inflate currency to their own their mutual benefit, subversively stealing the wealth of Joe public.

They increase the debt bubble until it POPS leading to rapid deflation....the ultimate killer.

I don't actually agree that the Dollar will get weaker, quite the opposite in fact.

As Japan, China and Europe become increasing unstable big money will rush into the last (perceived) safe haven that is the dollar......Just before this final bubble pops.

MeelionDollerBogus's picture

"They increase the debt bubble until it POPS leading to rapid deflation....the ultimate killer."

This doesn't happen. Hasn't happened. Prices go up for good or the currency ceases to exist (that is not deflation).

yogibear's picture

You can have a collapse in demand from  individuals. You just meed more slaves/consumers with lower wages, higher taxes to make up the difference. Opposite of production (lower costs by producing more).

The slaves/consumers will take out more loans/debt and die in debt. 

Make goods cheap enough to get by with, but saddle them with debt. 

It seems like the ideal bankster plan.

e-recep's picture

yep, and that's why the kings and emperors have expelled the usurers from their realms. every time the parasites nested in a new country, the local economy went into the shitters in the long run and their host died or the host got rid of the parasites.

MeelionDollerBogus's picture

History says this has never happened. Not one empire died in deflation. Ever.

PowerPlayer's picture

The Great Depression is one obvious example of deflation.  Everything Bernanke has done has been to avoid a Great Depression type scenario.   

Don't get me wrong.  Who wouldn't love less expensive prices, but I don't know anyone anyone who wants lower wages?  Since wages don't usually get reduced in actuality, people are laid off or given less hours instead.  Companies defer investments because they don't want to invest in assets or people when they can buy them or hire them at cheaper prices in the future.  While I have been worried about inflation for the last 4 years like many people, I'm starting to become much more concerned about a deflationary scenario.       

BidnessMan's picture

Prices down 10% are not a win when your income goes down 100% if you are laid off. 

Certainly not a win for the millions of prudent saver retirees who expected to get 5% on their savings who now get .1%.  Their income is down 98%.  Dog food being 10% cheaper does not help.

yogibear's picture

The bankster cartel increase costs enough so the consumers become perpetual debt slaves.

Their spending decreases.

Make up the difference with more consumers in other parts of the world. More and more debt slaves. 

Bobbyrib's picture

So you think wages are being held up by Bernanke's Quantative Easing despite the fact that supply and demand decide wages (number of workers to job available). All employers have to do is pay more than unemployment (if they really need workers) and more than other countries willing to import foreign workers. It's not Bernanke that is propping up wages, he is completely fucking the middle class over by hiking expenses. Your account is only a month old, you should continue to read the articles. I hope you haven't been reading the article all along and believe in what Ben is doing (no offense).

PowerPlayer's picture


I have been a constant critic of QE.  Personally, I would have preferred that we accept short term pain for long term sustainable growth, but unfortunately the Fed chose to create this mess instead.  They have to know that the equity and housing markets aren't reflecting the underlying fundamentals.  What do they do now?  Pop the asset bubbles and watch the two bright spots, equity markets and housing prices turn south along with worsening the already weak employment and production figures.   

The fact is there are a lot more wars that have started from deflation and/or unempoyment than inflation.  We have seen Iraq, Venezuela, and Argentina all experience tremendous inflation and no wars.  On the other hand, look at places with tremendous amounts of unemployment, places like Libya, Egypt, Syria, Spain, and Greece.  It isn't a good formula to have half your youth unemployed and broke.  They start protesting, which sometimes turns to riots, which occasionally leads to revolution.

Think about it.  World War II was the perfect cure for the Great Depression.  When you have no economic activity, a war is a great way to create economic activity.  When you have inflation a war that increases economic activity is the last thing you really want.   

I hate the QE path that we have gone down, but my only point is that anyone that claims deflation doesn't exist or isn't a problem isn't looking at history.

Personally, if I was Bernanke I would get out of town and let Yellen sink with this ship either way, after all she contributed significantly to this mess.     

Urban Redneck's picture

They have been fighting the deflation of shadow money supply quite vigorously, but until excess reserves exceed the size the of both the required shadow banking de-leverage and net derivatives exposure-- there is a real threat of deflation, which they continue to battle by inflating the money supply- which unfortunately does trickle-down to the peasants and their little slice of the economic pie...

Seasmoke's picture

I think they are much more afraid of bring hanged.

ponzisaurus's picture

Mlord the rabble have breached the perimeter.

I see. activate the first z43k4 combat robot.

Yes mlord.

And bring me my box of cubans!

Bobbyrib's picture

Mlord requesting the cubans, of course being a champagne liberal.

bugs_'s picture

Deflation is our friend

Wouldn't you like to drive a 100 dollar car?

Smoke a 75 cent cigar?

I know I would!

daveO's picture

Store your savings outside the banking system, or Fed Notes. If not, you'll wake up in 1933 or 1971, with a dollar worth considerably less.