Inflation or deflation?

[dhukka]

Pushing a point of view. True enough.

However it's a point of view supported by the data, and underlined by deductive logical reasoning.

What's your point of view supported by?

If you find it unconvincing, again, rather than just stating an opinion, back it up with the data, or theory that refutes my argument or interpretation thereof.

We have all seen the results of your deductive logical reasoning in the past Duc, so I'd be more convinced if you just took a wild guess.

I probably agree with you mo more points in this debate than disagree. I recognize the potential for inflation but I fail to see the transmission mechanism to the real economy in the short to medium term based on a lot of the same data you use.

Note I am not, and have never in this thread claimed that what we are in is a period of deflation. I see opposing forces at work that are currently and will continue to approximately offset each other in the medium term.

 

[ducati916]

We have all seen the results of your deductive logical reasoning in the past Duc, so I'd be more convinced if you just took a wild guess.

I probably agree with you mo more points in this debate than disagree. I recognize the potential for inflation but I fail to see the transmission mechanism to the real economy in the short to medium term based on a lot of the same data you use.

Note I am not, and have never in this thread claimed that what we are in is a period of deflation. I see opposing forces at work that are currently and will continue to approximately offset each other in the medium term.

Since you obviously consider my analysis somewhat below your own, I would have thought that you might present an argument somewhat more substantive than your current effort then.

The transmission mechanism is the government running record deficits that are set to expand even further. The government is borrowing as the consumer either can't or won't.

Really.

So what's the opposing force to inflation? Perchance deflation? Or, if not - what exactly?

 

[dhukka]

Since you obviously consider my analysis somewhat below your own, I would have thought that you might present an argument somewhat more substantive than your current effort then.

The transmission mechanism is the government running record deficits that are set to expand even further. The government is borrowing as the consumer either can't or won't.

Really.

So what's the opposing force to inflation? Perchance deflation? Or, if not - what exactly?

I have no crystal ball and admit I might well be wrong by underestimating the current inflation threat, time will tell. I'll take the evidence as it comes in.

Basically I see an inflationary Fed and Congress offset by a deleveraging or deflationary household and corporate sector. The Fed under Bernanke is committed to creating inflation, I just doubt they can generate any substantial inflation in the next 12 - 18 months.

 

[Timmy]

The kick up in the velocity of money in the US has happened:

Graph below, from: http://research.stlouisfed.org/publi.../mt/page12.pdf
(Red oval mine)

So, higher inflation on the way now in the US? Hard to think that is likely given the still very weak economy (though improving) and very poor employment situation, but with the monster growth of money supply and the QE, and now the increase of velocity ... I think so.

Move up in the Fed Funds target ... when? A lot are saying not in 2010, but this is more likely now given the velocity change.

Any thoughts?

 

[Temjin]

I have no crystal ball and admit I might well be wrong by underestimating the current inflation threat, time will tell. I'll take the evidence as it comes in.

Basically I see an inflationary Fed and Congress offset by a deleveraging or deflationary household and corporate sector. The Fed under Bernanke is committed to creating inflation, I just doubt they can generate any substantial inflation in the next 12 - 18 months.

I agree with dhukka in that I certainly do not see any immediate threat of inflation in the short term. In the longer term, perhaps, but the deflationary forces including the commercial property sector, massive bad debt, unwillingness for both the banks to lend and consumers/businesses to borrow, high unemployment, plus dhukka's points, would easily outweigh any inflationary force.

Until the central banks start dropping REAL cash from REAL helicopters, and/or the economy start to grow rapidly with all bad debt magically eliminated without hurting the banks' balance sheets and all businesses/consumers start borrowing and consuming again, then no, no inflation.

Current economic data strongly correlate with the deflation theory right now.

In a way, you can have a printing press in your backyard and print trillion of dollars, but they are worthless until you can actually spend it or lend it out. The money isn't spent right now because of the weak demand and aren't lend out because of the need to maintain reserve ratio and as safeguard against further defaults (which are guaranteed 100% to happen).

If anyone want to repute this by saying the massive reserve in the banks will eventually lead to inflation, then read this and disprove Mish's theory.

http://globaleconomicanalysis.blogspot.com/2009/12/fictional-reserve-lending-and-myth-of.html

Of course, I'm not totally discounting the inflation scenario in the "longer" term. Politicians and central bankers could certainly get away and start their competitive currency depreciation game too fast.

Until the banks start lending again in full force, and consumers start spending again, while all the bad debt has largely been eliminated, then no, I see there will be an extended period of mild deflation just like Japan's lost decades.

I expect people to disagree with me of course, but regardless, being an armchair "observer" is pointless unless I can make money from being one. My investments are perfectly allocated to win in either the deflation or inflation scenario. (and can easily be changed at whim when new unexpected information arises)

But anyone who bets 100% on inflation, especially in the shorter term period, and decide to leverage into assets that benefit from it (i.e. precious metals, commodities), then I would say it is not a wise decision.

 

[Temjin]

Here is another empirical research on debt and deleveraging.

http://docs.google.com/viewer?url=h...eraging/debt_and_deleveraging_full_report.pdf

Some extracts from its executive summary

- Leverage levels are still very high in some sectors of several countries - and this is a global problem, not just a US one.

- Empirically, a long period of deleveraging nearly always follows a major financial crisis.

- Historic deleveraging episodes have been painful, on average lasting six to seven years and reducing the ratio of debt to GDP by 25%. GDP typically contracts during the first several years and then recovers.

- If history is a guide, we would expect many years of debt reduction in specific sectors of some of the world's largest economies, and this process will exert a significant drag on GDP growth.


Please tell me we are not facing a financial crisis and that it is DIFFERENT this time.



A small extract from David Rosenberg's latest article.

CREDIT STRAINS INTACT

First off, U.S. bank credit continued to contract last week (according to data released by the Federal Reserve) — by $0.5 billion for Commercial & Industrial (C&I) loans; $2.0 billion for real estate loans; and by $4.6 billion for consumer loans. This may be why the sustainability of a recovery being sustained without credit once the government stimulus is being questioned by Mr. Market. So far, the contraction in bank credit has amounted to $600 billion and is ongoing.

Second, the FDIC seized three more banks on Friday — two failed in Georgia and one in Florida. The 15 banks the FDIC shuttered in January 2010 is NINE more than the six they ate in January 2009 — when things were "really bad." What might that tell us, pray tell?

Third, one of the reasons the banks may not be lending is because the overall level of consumer credit quality has continued to deteriorate. After all, didn’t Fannie report on Thursday that its 90 day delinquency rate rose to 5.29%, as of November, from 2.13% a year ago (and the year-ago level was already in the process of increasing parabolically)?

 

[ducati916]

Tem

I agree with dhukka in that I certainly do not see any immediate threat of inflation in the short term. In the longer term, perhaps, but the deflationary forces including the commercial property sector, massive bad debt, unwillingness for both the banks to lend and consumers/businesses to borrow, high unemployment, plus dhukka's points, would easily outweigh any inflationary force.

Current Economic Indicators

February 01, 2010 (Close of Day)


Inflation % 2.82
GDP Growth % 5.62
Unemployment % 10.00
Gold $/oz 1,086.50
Oil $/bbl 74.43
Prime % 3.25

Well CPI is 2.82% from the official figures. That figure is rising all the time. That the banks are not lending is true, they are still essentially bankrupt. But as pointed out previously, if you are looking at the banks, you are looking at the wrong data.

Government debt and deficits are where you need to be looking. They are growing very quickly. They are growing to counteract the banks losses. Hence the next crisis, as evidenced via Greece, is a sovereign default crisis.

Current economic data strongly correlate with the deflation theory right now.

Simply incorrect. Observe the latest data. The data is still consistent with a wider and shallower structure of production, which, eventually, creates higher consumer prices. Consumer prices, as you can note, are already higher.

The interesting data point is the Backlog of Orders which has suddenly increased from seemingly nowhere. Of course, as stimulus spending from the government bouys demand, so the capital destruction that has already occurred, is now inadequate to provide supply, hence, prices rise, and prices are most definitely on the rise once again.

Also clear, is the effect of Fiscal Policy of deficit spending via Welfare and other social net programs. This of course flows directly to consumer demand, we all consume: food, shelter, clothing, etc.

The impaired capital structure, can now no longer provide supply to match demand, and prices rise.

jog on
duc

 

[Temjin]

Tem



Current Economic Indicators

February 01, 2010 (Close of Day)


Inflation % 2.82
GDP Growth % 5.62
Unemployment % 10.00
Gold $/oz 1,086.50
Oil $/bbl 74.43
Prime % 3.25

Well CPI is 2.82% from the official figures. That figure is rising all the time. That the banks are not lending is true, they are still essentially bankrupt. But as pointed out previously, if you are looking at the banks, you are looking at the wrong data.

Government debt and deficits are where you need to be looking. They are growing very quickly. They are growing to counteract the banks losses. Hence the next crisis, as evidenced via Greece, is a sovereign default crisis.

I just don't see how "inflationary" the above is except you the sentence where you stated, "That figure is rising all the time". Which is actually untrue depending on how you MEASURE it.

We all know price of housing was removed from official CPI measurement (for the US) since 1986 and only the housing cost in relation to rentals/mortgages are included.

I don't think I need to explain what will happen to this official CPI figure if we used the "old" measurement again.

You suggested to focus on government debt and deficits. How is it correlate with the CPI? More debt/deficits = higher inflation?

I certainly do not think a sovereign default crisis is anywhere inflationary.

Again, refer to the empirical report I've posted earlier. The facts are clear. Most financial crisis since the 1930s were highly deflationary, EMPIRICALLY. There are, of course, exceptions where economies went into hyperinflation as their government manipulate their currency in an attempt to maintain status quote. But it's not always possible and certainly not always politically "practical".

Another interest article to read is here.

http://globaleconomicanalysis.blogspot.com/2010/01/consumer-credit-drops-record-175.html

While monetarist clowns focus on so-called excess reserves and the huge surge in inflation that is supposed to bring (See Fictional Reserve Lending And The Myth Of Excess Reserves) I am watching the biggest plunge in consumer credit since WWII.

Please consider Consumer Credit in U.S. Drops Record $17.5 Billion.

Consumer credit in the U.S. dropped a record $17.5 billion in November as unemployment close to a 26- year high discouraged borrowing and banks limited access to loans.

The slump in credit to $2.46 trillion was more than anticipated and followed a revised $4.2 billion drop in October, Federal Reserve figures showed today in Washington. The median estimate of economists surveyed by Bloomberg News projected a decrease of $5 billion. The series of 10 straight declines was the longest since record-keeping began in 1943.

“Double-digit unemployment is eroding consumer confidence and the uncertainty is prompting consumers to pay down their credit card debts,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “We have not seen such a wholesale reduction in consumer credit since the last time we had double-digit unemployment rate following the early ‘80s recessions.”

Revolving debt, such as credit cards, plunged by a record $13.7 billion in November, the Fed’s statistics showed. Non-revolving debt, including loans for autos and mobile homes, declined by $3.8 billion. The Fed’s report doesn’t cover borrowing secured by real estate.

Bank of America Corp. Chief Executive Officer Brian T. Moynihan has said the largest U.S. lender needs to reduce the loss rate on credit cards, which ranked highest among the nation’s six biggest card companies in November. Bank of America’s card defaults are “still very high,” Moynihan, 50, said.

‘Significant Bubble’

“As an industry, we over-lent and customers over-borrowed, and that led to a fairly significant bubble,” Moynihan said Jan. 4 in an interview on Bloomberg Television in Raleigh, North Carolina. “We have to help lead the economic recovery. At the same time, we have to be responsible lenders.”

Total Consumer Credit



Total Consumer Credit Percent Change From Year Ago



Total Revolving Credit Outstanding





Consumers Attitudes Are Key To Deflation

The Fed has pumped (attempted to is a more apt description) $trillions into the economy.

Consumers (and lenders) responded by cutting credit. Here is the telling comment of the week from the CEO of Bank of America: "We have to help lead the economic recovery. At the same time, we have to be responsible lenders.”

New Religion

Banks have a new religion on lending.
Consumers have a new religion on borrowing.

If you think that is inflationary, you have no idea what inflation is. In case you need a refresher course please consider Fiat World Mathematical Model. http://globaleconomicanalysis.blogspot.com/2009/02/fiat-world-mathematical-model.html

Addendum:

It is not clear how much Consumer Credit really dropped. I received an email on Saturday from "Ivan" who caught an error in the Fed's G.19 spreadsheet.

Ivan writes:
Last night I commented on your "Consumer Credit Drops Record $17.5 Billion..." post, under the nickname Coyote on RocketSkates. The subject of my comment was that I found a spreadsheet error in a sheet available at the Fed's download page for G.19.

The published data for June-November 09 repeats exactly the data for June-November 08, and appears to affect the gross total (nsa) number from which the headline (sa) numbers are derived.

Assuming that the data over a five-month period did not repeat itself exactly for five months, exactly one year later, one has to conclude that the Fed's auditing and reporting is sloppy, even on important releases. Conspiracy and manipulation are plausibly deniable, bad auditing, less-so.

Next, I sent an email to 'Tyler' over at Zero Hedge, and he soon posted an entry on the subject, here: http://www.zerohedge.com/article/blatant-data-error-federal-reserve

This morning, I availed myself to Ron Paul via email, in the hopes that this might add some straw to the camel's back about the Fed's audit procedures.
Ivan

I agree with Mike in that consumer attitude is the key to deflation.

Of course, we could be debating forever since there is no universal acceptance on what exactly is "inflation".

Mike has another article on this.

http://globaleconomicanalysis.blogspot.com/2009/11/what-is-inflation-and-how-does-one.html

Different school of economists will see it differently.

Populist views are obviously on inflation = rising prices.

Austrian economists see it as inflation = money supply rises.

Mike's model, and amoung other popular economists/commenators such as David Rosenberg, Steve Keen, John Mauldin, all agree with his Fiat World Mathematical Model in that credit and credit marked to market dramatically effect the way the economy works.

Again, this discussion is more theoretically than I would really care. It's the practical action that counts. Like I said again, I am well prepared for the deflation and equally prepared if there is a run away inflation if politicians decide to go crazy.

 

[Timmy]

Thanks Temjin and duc, appreciate the views.

Sorry to harp on, any thoughts on if the increase in velocity is of any consequence / is it a tirgger for inflation fears / a catalyst / irrelevant / etc.?

 

[Tysonboss1]

Hi Guys,

Here is two video series that I watched some time ago, Both of these series help answer alot of questions I had always had about the money system in an entertaining cartoon way. the first series is mainly about what money is. the second series talks alot about inflation and deflation.

1st series, this is the first video there are 5 in total
http://www.youtube.com/watch?v=vVkFb26u9g8

2nd series, this is the first video there are 8 in total
http://www.youtube.com/watch?v=_doYllBk5No
I highly recommend these videos,

 

[ducati916]

Tyson

I just don't see how "inflationary" the above is except you the sentence where you stated, "That figure is rising all the time". Which is actually untrue depending on how you MEASURE it.

Simply look at the attached data. This chart will appear at the bottom of the page. Essentially unmitigated inflation since the 1940's, except for our little dip of 2008/2009.

We all know price of housing was removed from official CPI measurement (for the US) since 1986 and only the housing cost in relation to rentals/mortgages are included.

As you seem to be citing Mish as your authority, Mish’s argument for deflation centres around the following assertion:

believe housing belongs in the CPI. Regardless, the Fed could have and should have taken housing prices into consideration instead of following a fatally flawed OER as its measure of housing prices.

Let’s first define exactly what the CPI actually is.

CPI’s measure the cost of a basket goods and services purchased by the average household each month. The baskets composition and weighting are usually based on surveys of household or family expenditure habits.

Now whether you argue that CPI’s are useful or worthless, that at this juncture is simply irrelevant. What is relevant however is that it is monthly expenditures.

Here then the argument shifts to rent, or, mortgage payment. Any difference quantitatively or qualitatively? No, not really. On that basis I have no issues with either being included. There will of course be quantitative differences in the CPI for those who take variable rate mortgages as opposed to fixed rate mortgages, they will likely be more volatile – that however is not Mish’s point.

Mish wants house prices included in the CPI. This under the definition of the CPI is simply nonsense.

As in the case of any other good, the capital value of land is equal to the sum of its discounted future rents. The value of the land increases as the capitalization rate falls with interest rates. Thus when the Fed lowered rates, the present value of the implied future rents on land became more valuable.

Ground land, then, is ‘capitalized’ just as are capital goods, shares in capital-owning firms, and durable consumers’ goods. Rothbard.

Why is land classified as a capital good? Essentially the answer is durability. Land, is for all intents and purposes, eternal and unchanging, as such, it is capitalised, because otherwise it’s value becomes infinite, and it could never be bought or sold for money.

The raw land cost is generally 10 to 25 percent of a home. In 2001, the Bureau of Land Management (BLM) sold government-owned land to developers for $26,672 per acre in Las Vegas, Nevada. Four years later, BLM acreage was going for $270,000 per acre. So while land prices were increasing tenfold, the medium new-home price shot from $130,000 in December 2000 to $350,615 in early 2006.

I won’t actually look at the reasons why [inflation via fractional reserve bank lending] the price rose so dramatically, however the facts remain, placing housing in the CPI, when a significant component of the price is a capital cost, is simply untenable.

So while placing housing prices in the CPI helps make Mish’s argument for a CPI based deflation, it is actually highly inaccurate.

You suggested to focus on government debt and deficits. How is it correlate with the CPI? More debt/deficits = higher inflation?

Government deficit spending is being spent on economic stabilisers or what is more commonly known as Welfare or the dole. This taxpayer funded largesse effects a redistribution of wealth. The central belief of Keynesians being, lower incomes, spend more of their disposable incomes on consumption which, when supply is reduced via reduced investment of capital, raises prices due to steady or increasing demand

I certainly do not think a sovereign default crisis is anywhere inflationary.

Money, due to it's high property of exchangability increases the liquidity and marketability of goods and services. These are both forms of risk. Risk commands a premium. By reducing risk, viz. increasing both marketability & liquidity, money lowers prices.

If money, fiat money collapsed, initially, we may be forced back to direct exchange [barter] which would raise prices. You I suspect are basing your observation of a deflation on the banking crisis, which was not a crisis of money, rather, of financial system solvency, which meant, that everyone wanted to run to cash.

In a sovereign default, running to cash is a pointless exercise, as the state stands behind a fiat currency, nothing else.

Again, refer to the empirical report I've posted earlier. The facts are clear. Most financial crisis since the 1930s were highly deflationary, EMPIRICALLY. There are, of course, exceptions where economies went into hyperinflation as their government manipulate their currency in an attempt to maintain status quote. But it's not always possible and certainly not always politically "practical".

Incorrect. The 1929-1934 crisis was deflationary. Every crisis since has been inflationary. If you disagree, name your crisis, cite your evidence and I shall refute it.

I agree with Mike in that consumer attitude is the key to deflation.

Overly simplistic. While I agree that consumer attitudes are important, they most certainly are not primary. You will need to provide some argument as to why you feel they are important, if you want discussion on this point.

Of course, we could be debating forever since there is no universal acceptance on what exactly is "inflation".

As you seem to adhere to Mish's dictums: Mike's model, and amoung other popular economists/commenators such as David Rosenberg, Steve Keen, John Mauldin, all agree with his Fiat World Mathematical Model in that credit and credit marked to market dramatically effect the way the economy works.

The definition I adhere to is: Inflation is a net expansion of money supply and credit, where credit is marked to market. Deflation is the opposite: a net contraction of money supply and credit, where credit is marked to market.

I have no problems with this definition, in fact, I rather like it. So, based on Mish's definition:

State Government Total Outstanding
2006………….$389,540 million
2009………….$1,470637.0 million

US Corporations
2006…………$2,500,770.0 million
2009…………$6,273,973.0 million

Mortgage Debt
2005…………….$12,090,031.0 million
2009 Q2………..$14,483,202.0 million

US Government Debt
2005……………$8,100.0 billion
2009……………$11,985.0 billion

So based on those numbers, where exactly is the deflation? The current debt expansion due to government and corporations more than makes up for the rather minor contraction in consumer debt. From the numbers, it still looks like an inflation.

This of course does not include future liabilities: Social Security, Medicare, Medicaid, Welfare. These PV liabilities run into further Trillions of dollars. Where exactly are they going to come from?

Again, this discussion is more theoretically than I would really care. It's the practical action that counts. Like I said again, I am well prepared for the deflation and equally prepared if there is a run away inflation if politicians decide to go crazy.

Theory is always the starting point. If you don't understand the problem correctly, how can you possibly solve the problem?

As to the charts posted by Mish, they're essentially nonsense. Consumer credit has, on his chart, contracted by what 3%'ish, Revolving Credit, look at the drop in the 1970's as compared to current figures, there's no comparison.

The contraction in price inflation is far more significant in the PPI data. This is actually far more important, as it indicates a contraction in investment in capital and capital goods + labour. This, is what will [and already is] constraining supply, which, in the face of steady demand, drives consumer prices higher [CPI]

jog on
duc

 

[explod]

Sual Eslake leads with an interesting take, in the Business Age today, on how hyperinflation is impossible in the current climate and particularly sighting the US, the link here:- http://www.theage.com.au/business/hyperinflation-is-a-hollow-threat-20100420-srsy.html

So why is he so vehemment, got this littleole black duck (conspiracy theorist) thinking, Uh Huh and sure enought James Turk has an article out overnight saying just the opposite the link :- http://www.fgmr.com/hyperinflation-looms-dollar-arrives-at-its-havenstein-moment.html

So most will know what I think but open to you Sisters and Brothers,

 

[MRC & Co]

Flattening of the curve seen recently, probably pricing in deflation.

 

[Dona Ferentes]

THE GREAT MONETARY INFLATION
- Paul Tudor Jones

COVID-19 is a one-of-a-kind virus that has triggered a one-of-a-kind policy response globally. The depth and magnitude of the economic drop-off took modern monetary theory—or the direct monetization of massive fiscal spending—from the theoretical to practice without any debate.

A. Debt Addiction
B. Money Printing is a Hard Habit to Kick
C. Seeking Refuge from the Great Monetary Inflation

There is a host of assets that at one time or another have worked well in reflationary periods:
1. Gold – A 2,500 year store of value
2. The Yield Curve – Historically a great defense against stagflation or a central bank intent on inflating. For our purposes we use long 2-year notes and short 30-year bonds
3. NASDAQ100 – The events of the last decade have shown that quantitative easing can rapidly leak into equity markets4.Bitcoin–There is a lengthy discussion of this below
5. US cyclicals (long)/US defensive (short) – A pure goods’ inflation play historically
6. AUD-JPY – Long commodity exporter and short commodity importer
7. TIPS (Treasury Inflation-Protected Securities) – Indexed to CPI to protect against inflation
8. GSCI(Goldman Sachs Commodity Index) – A basket of 24 commodities that reflects underlying global economic growth
9. JPM Emerging Market Currency Index – Historically when global growth is high and inflationary pressures are building, emerging market currencies have done quite well

https://www.docdroid.net/H1fuimX/the-great-monetary-inflation-pdf

(- big rap for Bitcoin as a store of value)

 

[noirua]

German Consumer Prices Fell in September, in Line With Forecasts -- Update

German Consumer Prices Fell in September, in Line With Forecasts -- Update

uk.advfn.com

Consumer prices fell 0.2% on month and on year measured by national standards, Destatis said. Both readings were in line with the forecasts from economists polled by The Wall Street Journal.

 

[basilio]

Governments around the world are pumping money at mindboggling figures into the economy to prop up real estate, the share market and financial institutions. The consequences of this river of money ? Historically it has been the collapse of economies whether it it was it Germany in 1922 or Zimbabwe inflation from 2007 onwards.

Ian Verrender explores what is happening. If you own assets you are ok. If you have dollar savings or few assets you are in trouble. If the whole game blows up...

There's no point sticking your savings in the bank because the game is rigged against you

Rain, hail or shine, the financial markets and property boom must go on. And to ensure that, central banks are fixing the game with a once-radical money-printing program that has only helped those with real estate and investment portfolios, writes Ian Verrender.

www.abc.net.au

 

[againsthegrain]

Governments around the world are pumping money at mindboggling figures into the economy to prop up real estate, the share market and financial institutions. The consequences of this river of money ? Historically it has been the collapse of economies whether it it was it Germany in 1922 or Zimbabwe inflation from 2007 onwards.

Ian Verrender explores what is happening. If you own assets you are ok. If you have dollar savings or few assets you are in trouble. If the whole game blows up...

There's no point sticking your savings in the bank because the game is rigged against you

Rain, hail or shine, the financial markets and property boom must go on. And to ensure that, central banks are fixing the game with a once-radical money-printing program that has only helped those with real estate and investment portfolios, writes Ian Verrender.

www.abc.net.au

If we are talking about a crash on that scale that the dollar and people's savings get wiped out I don't think having a few investment properties will save you. Nobody will be paying rent and the bank will be knocking for the repayments, or perhaps the liquidators? Your assets will get sold off for 20c on the dollar and you will still owe the rest.

I agree some assets may be good perhaps physical gold and silver can always ride it out burried in the ground.

 

[wayneL]

Just continuing with the thread necromancy here.

The general feeling among finance boffins Esther quantitative easing is inflationary, perhaps even hyperinflationary. And we have certainly seen some inflation over the last do you quarters, particularly in the u.s.

Powell has been categorising this as "transitory".

One of the greats in the macro field is Lacy Hunt, who has stuck to his guns about the current situation being ultimately deflationary. Adding to the equation is Steve Van Meter who has always maintained that quantitative easing is actually deflationary and has been making a pretty compelling case recently that higher prices are being rejected.

Up to recently the futures price of lumber has been the most commonly quoted data point supporting the hyperinflationary argument... But in the last little while lumber has crashed back down to earth... Every bit as spectacularly as it's rise.

The explanations from Van Meter have been particularly useful in helping me to understand that quantitative easing is not actually printing money, and I am gradually coming around to Lacey Hunt's thinking on this.

Both names easily searchable on YoooTooob etc.

 

[divs4ever]

well is see 'inflation' as a reduction of buying power of your dollar

so what is your definition of deflationary

i see 'shrinkflation ' as the same quality product but a smaller quantity for the same price ( of course inferior quality at the same price is possible as well )

now yes i see inflation as 'transitory ' .. inflation will gain traction quickly morph in hyper-inflation , and not that long after the currency will collapse ( or 'reset ' )

now we aren't talking seconds , but within 10 years for the cycle is very possible and 10 years in the lifetime of a nature is actually 'transitory ' , just maybe not the outcome you were hoping for

now your supposition that higher prices will reduce consumption , is partially valid , but SOME products and services will be hard to cut back on ( let's see if the government reduces the GST for example ) , but sure SOME products will face reduced sales ( but the top quality stuff the very elite buy will wander along just fine )

you can be sure nearly all the billionaires will sell their private jets and yachts ( sarcasm )

now sure in some areas reduced sales , will mean reduced margins and that MIGHT cause prices to fall ( many businesses rely on HIGH turnover to keep margins healthy , so reduced turnover means margins are contracting already , maybe dangerously so )

the problem is THIS time we have multiple bubbles , and an addiction to cheap finance .. how long until a credit-crunch ( or freeze ) assuming September 2019 wasn't that moment and we have been distracted ever since

 

[JohnDe]

An informative view on issues facing the US, and he world.

"On episode XXIX of “In the Know,” ARK CEO/CIO, Cathie Wood, is joined by Nancy Lazar, Piper Sandler’s Chief Global Economist. Together, Wood and Lazar, weigh in on inflation, deflation, interest rates, inventories, business confidence, bond yields, and more. As always, they also discuss fiscal policy, monetary policy, market signals, economic indicators, and innovation."

May 20, 2022 — In The Know with Cathie Wood - Invest in Innovation with ARK Invest

On episode XXIX of "In the Know," (May 20, 2022) ARK CEO/CIO, Cathie Wood, is joined by Nancy Lazar, Piper Sandler's Chief Global Economist..

ark-invest.com