Step Aside Abe's Deflation "Monster"; Meet LaGarde's Deflation "Ogre"

Tyler Durden's picture

What could be worse than a falling cost for things that the increasingly cash-strapped consumer desires? We are not entirely sure but Christine Lagarde is deathly afraid of it...


In other words, 5 years of debt monetization on an unprecedented scale were not enough! Get back to work Mr Draghi, Mrs Yellen, and Mr Kuroda.


Lagarde (via Bloomberg):

"The world could create more jobs before we would need to worry about the global inflation genie coming out of its bottle,” Lagarde said in a speech at the National Press Club in Washington.


If inflation is the genie, then deflation is the ogre that must be fought decisively,” she said.


She recommended that central banks in the most developed economies wait until “robust growth is firmly rooted” before ending unconventional monetary policies.




In the U.S. “it will be critical to avoid premature withdrawal of monetary support and to return to an orderly budget process, including by promptly removing the debt ceiling threat,” she said.


It seems its inflate-or-die - no matter what the damage (but weren't we told that recovery is here?)

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Non Passaran's picture

Fuck you, Lagarde!

Cult_of_Reason's picture

She's right about deflation though.

No matter how much the Fed prints, the Velocity of M2 is plunging.

LawsofPhysics's picture

deflation of what?  be specific.  The supply and velocity of "money" become pretty damn irrelevant when that currency is no longer accepted.

eclectic syncretist's picture

If they truly wanted inflation they would give the printed notes to common people and not the banks.  It wouldn't be any harder to do than that.  Their sophisms on the matter are mere pissings in the wind.

LawsofPhysics's picture

See my post below.  We are here because there i fundamentally no rule of law and the system has been rewarding irresponsible behavior for quite some time.  Nothing changes until the moral hazard is addressed, period.

hedgeless_horseman's picture



Meet LaGarde's Deflation "Ogre"

For us peasants with savings and no debt, the ogre known as deflation is actually not the monster it is made out to be... 

...inflation is the real monster.

ACP's picture

Or better yet, Bernanke's inflationary orgE.

(photo not available)

Herd Redirection Committee's picture

Those with income and little debt will benefit from deflation.

Problem, the TBTF and the government are highly leveraged.  They stand to lose from deflation. And there is your answer as to why deflation 'must be fought'.

trader1's picture


lagarde is on script with the new ad campaign for hyper-inflation.

i'm surprised the Tylers haven't made the connection between her remarks and this past weekend's basel banking comittee outcome, but maybe i missed it.1

World banking regulators said they would soften the terms of a rule meant to ensure banks' soundness, bowing to pressure from banks that had argued it would stifle their lending to consumers and businesses.

The Basel Committee for Banking Supervision, made up of banking regulators from around the world, said it had revised the definition of its leverage ratio in ways that will allow banks to report lower levels of overall risk. The leverage ratio measures capital held by a bank against its total assets, so the changes will lead to higher reported capital ratios. That will reduce the pressure on banks to either shed assets or raise more capital to meet the requirement.

The biggest beneficiaries of the changes appear likely to be banks most involved in securities and derivatives markets. Most important, the rules no longer require banks to count 100% of their off-balance-sheet assets. That not only includes most of banks' derivatives exposures, but also the guarantees and letters of credit that are essential to greasing the wheels of international trade.

In addition, the changes allow for extensive "netting" of securities-financing transactions, such as repurchase agreements, or "repos," for greater counting of margin payments received from counterparties. And they let banks eliminate double-counting of exposures involving central counterparties. Those changes will have the effect of reducing assets reported under the leverage ratio, increasing banks' reported ratios.

The announcement is the latest in a series of amendments to the aggressive new rules that regulators drew up in reaction to the 2008 financial crisis, in an effort to make the financial system safer. Much of that fine-tuning has had the effect of softening the impact of the new rules, as the industry has managed to persuade regulators that their plans were overzealous. Sunday's announcement follows a similar relaxation of a new rule on minimum liquidity standards at the start of last year. It also follows a significant dilution in the U.S.'s so-called Volcker rule, which is an attempt at curbing speculative trading by banks, and signs from the European Union that it will soft-pedal parallel plans of its own.



1i try not to visit this site too many times throughout the day, but it's tough.  it's an addiction i'm trying to fight, not so quite effectively. i'm finally beginning to question what the hell it is i actually gain from reading and commenting here.  although, ZH has had such an invaluable effect on my development as a person in the last 4+ years.  it has definitely been quite an interesting experiment in retrospect.  what do i gain from continuing this experiment?  what do i do with the time gained by focusing less on the daily noise and focusing more on the longer term perspective.  that's a battle that's winnable right now, and it's in my mind.  oh shit, i'm opening my thought processes to the ZH world.  and the NSA?  hello friends.  one love :-)


commence the junking!  i love you too :-)

maskone909's picture

the moral hazard in finance is contingient to money in politics.  see super PACS.

the fish rotts from the head.

LawsofPhysics's picture

Simple solution then, cut the fucking heads off.

El Vaquero's picture

What is that phrase you are so fond of?

LawsofPhysics's picture

And rent/housing, food, healthcare, energy, education?

Moreover, if the "world economy is recovering", then there can be no "threat of deflation".

Again, pull your head out of your ass.

cougar_w's picture

The inflation v deflation arguing that goes on around here seems odd. On the one hand, everyone says unemployment is played down and the real number in the US is probably 20% in places. Then they say that the Fed printing money is inflationary and hyperinflation is in the wings.

o rly.

The question is not about the abstract or monetary value of money. It is instead about the ability to pay and the willingness to buy. People simply are not buying "it" anymore. They are un- or under-employed with few prospects and are flat broke. They have no money, at any value inflated or otherwise, no prospects for such, and in an increasing number of locales cannot acquire essentials except as parasitic debt-money or as government handouts, both of which are in terminal decline. In most places families are making it month-to-month, sticking to the basics, and laying low.

We can maybe eventually expect to see monetary inflation of some kind in the things people simply cannot live without (imported food and fuel, where US$ must compete with other currencies) but not in things they can stretch for a while (clothing, electronics) and none at all in things they cannot hope to afford (entertainment, new cars, higher education, luxury goods). Maybe the rich will drive up the cost of those things, but that's Wall Street eating the world with free money from QE none of which makes its way to Main Street.

Of course, nobody really knows what will happen. But seriously, expecting broke Americans and small business to drive a hyperinflationary episode by greedily gobbling up everything on the shelves with all their inflated Bennie Bucks is just laughable.

Cult_of_Reason's picture

Most people don't understand our fractional banking system and extraordinary ability of the banks to increase the money supply exponentially (by making loans), BUT no matter how much the Fed prints, there is no demand for loans in the economy (due to structural problems).

Japan has been printing like there is no tomorrow for 25 years and still cannot break the back of deflation due to structural problems. I think the US is Japan.

Its_the_economy_stupid's picture



Keep talking

I'm listening.

maskone909's picture

Dont know why u got the down votes cuz ur spot on

Cult_of_Reason's picture

I'm sure the down votes are coming from the gold bugs. They have convinced themselves about imminent hyperinflation and get angry (anxious about last year ~30% gold loses and in denial about strong deflationary forces in the economy) when they hear about deflation.

Anger is an early stage of the cycle, long way to go before gold becomes an attractive investment near the capitulation.

Thrill > Euphoria > Complacency > Anxiety > Denial > Anger > Bargaining > Depression > Acceptance > Fear > Panic > Capitulation

rabbitusvomitus's picture

deflate away, eyes gots cash money!!! poppa needs a new caddy for cheap!

NihilistZero's picture

No she's not.  The FED's policies will inevitably worsen the unavoidable asset deflation.  By stoking commodity prices higher without providing a raise in the real wages of working people you get an inflationary spike followed by a deflationary crash.  The expansion of credit is doing nothing for most working peoples balance sheets and the run up of Housing Bubble 2.0 and Stock Bubble ver whatever CAN NOT be sustained without an increase in the real and disposable income of working people.  All the FED is doing is making the roller coaster drops that much more steep and close together.

Cult_of_Reason's picture

"without providing a raise in the real wages of working people"

Dude, this is deflationary.

LawsofPhysics's picture

Not if the cost of essential commodities and services that the working person must purchase are still rising.

Pull your head out of your ass.

NihilistZero's picture

We're experiencing stagflation now.  An early 80's style deflation is coming wheter Mr. Yellen and company want it or not...

cougar_w's picture

It could end up to be way worse than anything we've ever seen, at least in the recorded history in the west.

The amount of inter-dependent economic gearing right now is truly terrifying. In the US, we are massively dependent on imported oil even for our domestic food production and distribution. Once the shocks start and people can see the monster clearly, they might drop out of the consumer system completely and go it alone however they can; quit the day job, grab some land, setup a homestead, defend it with the neighbours, and forget about the world. At which time there will simply be no buyers for anything at all at any price.

Except maybe for shovels and seeds. And as always we'll probably end up murdering each other over access to water and land.

Its_the_economy_stupid's picture

Ok, stop talking,

Now I'm scared.

NihilistZero's picture

I'm not easily sold on the apocalypse scenario.  Not saying it's not possible, but everytime I read a good Popular Mechanics article or something elsde science related I doubt the Oil doom scenario.  The fact that a Hydrogen car exists (along with many other pieces of energy tech) has led jme to believe the oil dependency is much more political the practical.  I'm no tin foil hat imagining a world od water cars tomorrow if not for Exxon, but at the same time we live within shouting distance of a million years old perpetual energy machine called the sun.  I fully expect Nuclear Fusion Energy to be achieved within my lifetime.

maskone909's picture

velocity of money is plunging.

quick, lets do more of the same shit CNTRL-P

only way to speed up m2 is to give money to the people.  they pretend they do not know this.  they would rather push society to the limits than give wealth to the citizens.

LawsofPhysics's picture

Here is a novel idea, how about giving it to the responsible citizens, you those of us living within our means, paying off debt etc.

The reason we are here in the first place is because the system has been rewarding irresponsible behavior.  Just ask John Corzine...

maskone909's picture

i like the sound of that!  maybe we can leave it up to the DHS to decide who is and isnt responsible.  we can force people to wear patches that have low credit scores.  maybe ship them off to camps to "work" off their debts.  novel idea indeed.

LawsofPhysics's picture

That which cannot be sustained, won't be, no matter how much you cry and whine about it.  Don't know where you get "camps" from that post fucknut.

maskone909's picture

fucknut? u mad bro?  come at me bro!

nobody is whining over here pal. 

sounds more like you are bitter because you slaved your ass to pay down some bullshit debts and now you want an award.  you are just a good house negro.  get this man a bean pie and a grape koolaid.  hes earned his house privaliges.

LawsofPhysics's picture

LMFAO!  Don't worry about us, my nigga's get their shit done.  I have been long sharecropping for quite some time...

Herd Redirection Committee's picture

I figure DEBT JUBILEE will accomplish more.  Although then the highly leveraged cronies and governments will have their debts wiped as well, hopefully it would effectively reduce the oligarchy's power, and the size of the state.

donsluck's picture

Debt jubilee, the Jewish tradition, is scheduled. If it happens organically (which is where we are now) it is highly destructive. All parties have to be fully aware of the jubilee and it's schedule to allow retirements of debts BEFORE the jubilee date.

Herd Redirection Committee's picture

Definitely, because how is business possible without TRUST?  And trust is about to be destroyed in epic fashion these next 20 years.

But hopefully when its all over, we can have a return to justice, and smaller governments(and not just replaced with 'a law unto themselves' Multinational corporations).

LawsofPhysics's picture

Only wipe out a certain amount of debt.  Cronies have considerably moar debt than most...

maskone909's picture

history will look back on this mess and see that all the money given to bank bailouts could have saved every last underwateer mortgage.  bot no more JPmorgan or GS?  oh the horror!?  what would we ever do!?!?


big shout out to paulson, geithner, and friends!

LawsofPhysics's picture

+1 for calling out Hank "tanks in the streets" Paulson.

holgerdanske's picture

they worry about deflation, because that would make the banks superflous for saving money. That means that you could stack your cash under the matress and not loose value.

And that would go against their unsatiable appetite for control, taxes and fiat fraud.

The system is going to be that you earn so much, we take that much, and you better spend the rest before it becomes worthless.

Ain't working with gold, and ain't working with deflation. Thus these are the arch enemies of the establishment.


All this from a synchronized swimmer that earns a tax free salary each month by far exceeding what normal people earn in a year. And all paid for by the taxpayer.


Ironic, and disgusting.


666's picture
eclectic syncretist's picture



Charles Nelson Reilly's picture

seriously.... is this woman fucking retarded?

americanspirit's picture

Only with a bag over her face, please

101 years and counting's picture

fuck you, you stupid orange bitch.

WhyDoesItHurtWhen iPee's picture

Can't imagine what it would look like if LeCunt and Bohnner had a child.