Peak Propaganda: Meet "Joyflation"

Everyone has heard of "inflation" and "deflation" and, when things go really bad and another recession is just around the corner coupled with soaring prices and plunging wages like in Japan for example, "stagflation." But have you heard about its optimistic, happy-go-lucky cousin?

Meet Joyflation!

This is the term which has been coined by Oxford Economics Ltd. to describe the combination of the oil-driven slowdown in inflation and accelerating economic growth.

Remember: according to central bankers deflation was the root of all evil, but not anymore, at least not when it involves declining commodities... or food... or LCD TV... or iPads... or pretty much anything. Because when inflation isn't there and stocks keep going up, it is time for even the most hard-core Keynesian to go, what else, Austrian!

From Bloomberg, on the semantic of __flation: "It’s an uplift that counters some of the pessimism from the end of last year,” said Scott Livermore, managing director of macro forecasting at Oxford Economics, which advises companies and governments. “From a U.K. perspective, the fall in oil comes at a very good time."

Uhm, we appreciate a good verbal joke as much as the next guy, but can someone please explain how what we wrote a month ago in "It's A Huge Crisis" - The UK Oil Industry Is "Close To Collapse" leads to "an uplift that counters some of the pessimism from the end of last year."

The non-GAAP deflation acrobatics continue:

While that risks setting off alarm bells, Livermore says it will be a form of “good deflation” because cheaper energy boosts the spending power of consumers and companies. “Bad deflation” is caused by depressed demand and high unemployment, and tends to become endemic.


“It’s like we’ve had a big tax cut, but one paid for by the oil-producing nations overseas rather than by the Treasury,” he said.

Which is great...for a few months. What happens next is described in painful detail in "How The Petrodollar Quietly Died, And Nobody Noticed" in which among everything else, we noted the following:

The recycling of petro-dollars has benefited financial markets liquidity conditions. However, this year, we expect that incremental liquidity typically provided by such recycled flows will be markedly reduced, estimating that direct and other capital outflows from energy exporters will have declined by USD253bn YoY. Of course, these economies also receive inward capital, so on a net basis, the additional capital provided externally is much lower. This year, we expect that net capital flows will be negative for EM, representing the first net inflow of capital (USD8bn) for the first time in eighteen years. This compares with USD60bn last year, which itself was down from USD248bn in 2012. At its peak, recycled EM petro dollars amounted to USD511bn back in 2006. The declines seen since 2006 not only reflect the changed  global environment, but also the propensity of underlying exporters to begin investing the money domestically rather than save. The implications for financial markets liquidity - not to mention related downward pressure on US Treasury yields – is negative.

This was written in early November. Since then both forecasts: an even greater collapse in liquidity and even lower Treasury yields, have been validated.

And what happens after, is even worse, which is why we can't wait for someone, not Oxford Economics, to trademark the logical follow up to Joyflation: Deathflation.

At the end of the day, however, since the statistic in charge have now devolved to coming up with "clever" terms to disguise reality, there is a far simpler definition of the __flation word in question: propaganda.