Inflation or deflation?

[ducati916]

Inflation falling rapidly in the US, as per dhukka's argument.

Source: http://www.shadowstats.com/

Timmy.

 

[ducati916]

There is nothing incorrect with what I said, velocity has fallen off a cliff, no velocity, no inflation. When banks take those excess reserves, start to increase lending, stop tightening lending standards and businesses and households start to borrow more you'll get inflation.

Incorrect.

Velocity has fallen off a cliff. That represents the demand for currency, as credit has contracted, which, I agree is deflationary.

However, the contraction in bank credit, is being offset by an expansion in government credit via deficit spending. The result are the data points in the first set of charts.


Currently deflation is a non-event.

 

[ducati916]

http://globaleconomicanalysis.blogspot.com/2008/12/humpty-dumpty-on-inflation.html

jet,

That article is dated December 11 2008. As such, it is already out of date. Monetary and Fiscal Policy has moved a long way [inflationary] forward since then.

If you're looking at the banks, you're looking in the wrong direction currently.

jog on
duc

 

[Timmy]

Inflation is negative in the US:

Data updated to 14 August '09

Data source, US Bureau of Labor Statistics (unadjusted figures)

The negative inflation numbers are probably at an extreme, though, and will move back into positive in coming months.

 

[Timmy]

Duc, curious why the inflation chart you show from the Atlanta Fed shows a kick-up in inflation on the right-hand extreme whereas all other charts of US inflation are showing continued falls. Is the right-hand extreme on the Fed charts a projection?

 

[lasty]

Duc, curious why the inflation chart you show from the Atlanta Fed shows a kick-up in inflation on the right-hand extreme whereas all other charts of US inflation are showing continued falls. Is the right-hand extreme on the Fed charts a projection?

Forget about the graphs.... You only have to look at your utlility bills,supermarket shopping and day to day expenses to see if we are sitting in an inflationary or deflationary scenario (talking about here in Australia)

 

[dhukka]

Incorrect.

Velocity has fallen off a cliff. That represents the demand for currency, as credit has contracted, which, I agree is deflationary.

However, the contraction in bank credit, is being offset by an expansion in government credit via deficit spending. The result are the data points in the first set of charts.


Currently deflation is a non-event.

Again, nothing incorrect in what I said, currently inflation is the non-event. We shall see in the coming years if that remains the case.

 

[gooner]

Forget about the graphs.... You only have to look at your utlility bills,supermarket shopping and day to day expenses to see if we are sitting in an inflationary or deflationary scenario (talking about here in Australia)

Plasma TV's - price down
Apple Mac - price down
Cars - price down

Inflation for the year to June was 1.5% (WWW.RBA.GOV.AU), so overall modest inflation, but decelerated very rapidly. Doubt we will go to deflation though - probably very low inflation for a while

 

[white_goodman]

STAGFLATION!

 

[lasty]

Plasma TV's - price down
Apple Mac - price down
Cars - price down

Inflation for the year to June was 1.5% (WWW.RBA.GOV.AU), so overall modest inflation, but decelerated very rapidly. Doubt we will go to deflation though - probably very low inflation for a while

If you look at the breakdown
The big falls are in financial services ie home loans and transportation.

The others are up food eg 4.8%
Check your electricity bill.

You will be surprised on how much the household budget spends on food.
over 30%

 

[So_Cynical]

Plasma TV's - price down
Apple Mac - price down
Cars - price down

Food - price up
Insurance - price up
My Rent - price up :frown:

 

[white_goodman]

My Rent - price up :frown:

land tax related, good work NSW govt

 

[gooner]

Food - price up
Insurance - price up
My Rent - price up :frown:

And you may notice all those are non-tradeable goods (insurance can be depending on type of insurance) i.e. no or limited import competition. Tradeable goods have been under downward price pressure for years due to the impact of China and India which is why our standard of living has gone up so much.

And wages up because our exports get so much more in terms of trade.

 

[ducati916]

Again, nothing incorrect in what I said, currently inflation is the non-event. We shall see in the coming years if that remains the case.

Apart from your opinion, do you actually have any data that supports your assertion?

You know I'm sure the old adage - opinions are like assholes, everyone has one

 

[ducati916]

Duc, curious why the inflation chart you show from the Atlanta Fed shows a kick-up in inflation on the right-hand extreme whereas all other charts of US inflation are showing continued falls. Is the right-hand extreme on the Fed charts a projection?

Timmy,

The chart that you are displaying from shadowstats is simply a %change chart. Here is the Fed version. The first chart [posted previously] illustrates Fed policy, viz inflate the second simply shows by how much.

Thus the policy is inflate. Everyone else now has the same policy. The result has been to mute the deflationary credit event from last year and currently. Once started inflation it's almost impossible to stop without crashing the economy, thus what we'll see into the future is inflation.

 

[dhukka]

Apart from your opinion, do you actually have any data that supports your assertion?

You know I'm sure the old adage - opinions are like assholes, everyone has one

As we all know duc, given your track record of opinions, yours is worth less than an asshole, but lets indulge your latest fantasy for a bit.

My opinion doesn't differ a whole lot. Yes the Fed and every other central bank have adopted an inflationary stance, clearly represented by the ballooning balance sheet of the Fed in the case of the US. This is undoubtedly inflationary as that excess liquidity makes it's way into the economy. However it is the last point that is not happening. Excess reserves held at the Fed have grown proportionately with the growth in the Fed's balance sheet. Also, the velocity of money in the economy has dried up.

On the deflationary side you have a deleveraging household sector which has shed approximately $14 trillion in net worth, is reducing debt and increasing savings. The corporate sector also continues to deleverage.

So we have a deflationary household and corporate sector and an inflationary Fed coupled with a dose of fiscal recklessness on the part of the congress. I can easily see how that translates into inflation 3-4 years out, but it is currently not evident.

 

[ducati916]

As we all know duc, given your track record of opinions, yours is worth less than an asshole, but lets indulge your latest fantasy for a bit.

My opinion doesn't differ a whole lot. Yes the Fed and every other central bank have adopted an inflationary stance, clearly represented by the ballooning balance sheet of the Fed in the case of the US. This is undoubtedly inflationary as that excess liquidity makes it's way into the economy. However it is the last point that is not happening. Excess reserves held at the Fed have grown proportionately with the growth in the Fed's balance sheet. Also, the velocity of money in the economy has dried up.

On the deflationary side you have a deleveraging household sector which has shed approximately $14 trillion in net worth, is reducing debt and increasing savings. The corporate sector also continues to deleverage.

So we have a deflationary household and corporate sector and an inflationary Fed coupled with a dose of fiscal recklessness on the part of the congress. I can easily see how that translates into inflation 3-4 years out, but it is currently not evident.

Obviously touched a raw nerve there judging from your rather aggressive reply.

You accept that Central Banks worldwide have adopted an inflationary policy response. You also accept that in the future, unless this policy stance is reversed, that inflation will be the result.

Thus all that remains is the current timeframe.

You state that $14 trillion of net wort has been lost through asset price collapse. Agreed.

You state that the consumer is reducing debt.
Incorrect, look at the data. Consumer debt has only reduced by some 2% I'll post the exact numbers when I get back to my computer.

The Corporate sector is deleveraging via liquidation. This is not deflationary, this is inflationary. As capital is liquidated and stages of production curtailed, production is reduced.

Reduced production reduces supply. Reduced supply, in the face of stable demand, think necessities, food, power, etc, results in higher prices.

Demand is stable because the government is increasing government spending via deficits. These deficits are being expended within Welfare, Shovel ready, bailouts, etc.

The government borrowing and printing [via QE] is replacing consumer borrowing, thus, again the inflationary pressure is obvious in the data [refer to earlier charts]

The banks are simply not the correct place to be looking for the inflationary entry point. They were the credit creators in the last inflationary cycle, not this one however.

Thus I am not actually providing an "opinion" at all, rather simply elucidating the data for you.

 

[GumbyLearner]

Oh the **** I already have, has diminished SO MUCH in value.

The FOOD I eat is SO MUCH cheaper.

My COST OF LIVING EXPENSES are SO MUCH lower.

Wait, I just need to go to the men's and have a toss!

What a load of ****

 

[dhukka]

Obviously touched a raw nerve there judging from your rather aggressive reply.

You accept that Central Banks worldwide have adopted an inflationary policy response. You also accept that in the future, unless this policy stance is reversed, that inflation will be the result.

Thus all that remains is the current timeframe.

You state that $14 trillion of net wort has been lost through asset price collapse. Agreed.

You state that the consumer is reducing debt.
Incorrect, look at the data. Consumer debt has only reduced by some 2% I'll post the exact numbers when I get back to my computer.

The Corporate sector is deleveraging via liquidation. This is not deflationary, this is inflationary. As capital is liquidated and stages of production curtailed, production is reduced.

Reduced production reduces supply. Reduced supply, in the face of stable demand, think necessities, food, power, etc, results in higher prices.

Demand is stable because the government is increasing government spending via deficits. These deficits are being expended within Welfare, Shovel ready, bailouts, etc.

The government borrowing and printing [via QE] is replacing consumer borrowing, thus, again the inflationary pressure is obvious in the data [refer to earlier charts]

The banks are simply not the correct place to be looking for the inflationary entry point. They were the credit creators in the last inflationary cycle, not this one however.

Thus I am not actually providing an "opinion" at all, rather simply elucidating the data for you.

Thanks for your attempts at elucidation duc, but at the end of the day you are, like everybody else, just pushing a point of view. Unfortunately it is just not very convincing.

 

[ducati916]

Thanks for your attempts at elucidation duc, but at the end of the day you are, like everybody else, just pushing a point of view. Unfortunately it is just not very convincing.

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.