World's Largest Economy Slips Quietly Into Deflation

[Realistbear]

http://finance.yahoo.com/news/Consumer-prices-dip-01-apf-257098868.html?x=0&sec=topStories&pos=2&asset=&ccode=

Martin Crutsinger, AP Economics Writer, On Wednesday May 19, 2010, 8:57 am

WASHINGTON (AP) -- Consumer prices declined in April for the first time in 13 months while core inflation rose over the past year at the

slowest pace in 44 years.

The Labor Department said Wednesday that consumer prices edged down 0.1 percent last month, reflecting a big fall in energy prices. Core inflation, which excludes volatile food and energy, was flat. Over the past 12 months, core inflation is up just 0.9 percent, the smallest increase since 1966.

Perhaps the bursting bubbles are deflating the economy rather than inflating it. We all know it makes sense.

[babesagainstmachines]

You're gonna need a bigger helicopter

[AvidFan]

Posted elsewhere.

All three monetary aggregates now heading South in the US:

More here:

http://www.shadowstats.com/charts/monetary-base-money-supply

Round 2 of the crunch coming right up.

[Alan B'Stard MP]

Posted elsewhere.

All three monetary aggregates now heading South in the US:

More here:

http://www.shadowstats.com/charts/monetary-base-money-supply

Round 2 of the crunch coming right up.

Hows the monetary base looking?

[AvidFan]

Hows the monetary base looking?

You can see the hocky-stick YoY increase in the monetary base using the link - the graph at the bottom on the right. But the actual figure has come down quite a lot. Still way up on where it was a couple of years ago though.

Still, if no-one is borrowing and asset prices are taking further tumbles...

Edited May 19, 2010 by AvidFan

[ken_ichikawa]

Hold on won't deflation make China v happy?

Anyway what will happen is the printers will be turned on yet again.

[Alan B'Stard MP]

You can see the hocky-stick YoY increase in the monetary base using the link - the graph at the bottom on the right. But the actual figure has come down quite a lot. Still way up on where it was a couple of years ago though.

Still, if no-one is borrowing and asset prices are taking further tumbles...

Ooooh deflation. That ought to please the resident anarchists.

[AvidFan]

If what we're going to get is a normal recession now, I'd say it will all be about the dollar. My one caveat is that you shouldn't be betting against the pound for the next 6-12 months either, just gold and the euro as they are both the anti-dollar.

It's not based on US superiority, strength, managable debt levels, sound trade balances or a sustainable economy. It's just that most IOUs are written in dollars...

[swissy_fit]

If what we're going to get is a normal recession now, I'd say it will all be about the dollar. My one caveat is that you shouldn't be betting against the pound for the next 6-12 months either, just gold and the euro as they are both the anti-dollar.

It's not based on US superiority, strength, managable debt levels, sound trade balances or a sustainable economy. It's just that most IOUs are written in dollars...

I'd love to believe your bullishness about the pound, as I have more GBP than I should.

Can't see it though.

When GDP starts to tank again in the autumn as the cuts bite and the awfulness of the debt situation starts to become clear, how will the GBP rise?

[Realistbear]

Euro has a long way to go yet if Chris is right. Its low was around .86c IRC. Its a Hobson's Catch 22 situation a.k.a. checkmate:

http://finance.yahoo.com/tech-ticker/europe's-mounting-crisis-"we're-on-life-support"-chris-whalen-says-490996.html;_ylt=AvMXZxew0Qgwx2Ib7LkNrt.7YWsA;_ylu=X3oDMTE2ZmxlcnR0BHBvcwMxMQRzZWMDdG9wU3RvcmllcwRzbGsDZXVyb3Blc21vdW50?tickers=e

Europe's Mounting Crisis: "We're on Life Support," Chris Whalen Says

Posted May 19, 2010 07:30am EDT by Heesun Wee Wee in Investing, Banking, Politics

Despite a nearly $1 trillion rescue plan, concerns about Europe continue to haunt the financial markets. Late Tuesday, the euro slid to more than a 4-year low against the dollar, triggering another sell-off in U.S. stocks.

Beyond the obvious problems with Europe's "PIIGS", investors worldwide are nervously wondering how badly Europe's sovereign debt crisis is affecting the banking system -- both over there and here at home.

"In some ways European banks are worse than ours. They're certainly less transparent," says our guest Chris Whalen, managing director at Institutional Risk Analytics. "It's a strange time. And I think it talks to the basic lack of competitiveness, the lack of productivity really in Europe. And you also have the same problem in the U.S. We just have the flexibility of being able to print money."

So what does Europe's end game look like?

"For Europe, basically they have two options: Individual countries can continue to borrow money until they can't. Then they hit the wall," says fellow guest John Mauldin, president of Millennium Wave Advisors and author of the Thoughts from the Frontline e-letter. "Or they can willingly throw themselves into a Depression by cutting their deficits dramatically."

For now, Whalen says politicians aren't willing to make the tough choices about spending and cutting deficits. Instead, "we're just managing bubbles here," he says. "To me we're on life support right now. We still haven't figured out as a society, both Europe and the US, how we fix these economies and make them go again," Whalen says.

[Toto deVeer]

I'd love to believe your bullishness about the pound, as I have more GBP than I should.

Can't see it though.

When GDP starts to tank again in the autumn as the cuts bite and the awfulness of the debt situation starts to become clear, how will the GBP rise?

GBP, like the Yen could be good for the carry trade...total debt levels are almost identical...

[babesagainstmachines]

In the real world, the majority of our trade is with the Eurozone. I see no reason why a falling Euro is good for the UK - it will make it more difficult to export.

[otters]

You're gonna need a bigger helicopter

Don't you mean chopper