Mpc's Adam Posen Warns Britain At Risk Of Japan-Style Deflation

[Realistbear]

http://uk.finance.yahoo.com/news/mpc-s-adam-posen-warns-britain-at-risk-of-japan-style-deflation-tele-a0ee93d37062.html?x=0

MPC's Adam Posen warns Britain at risk of Japan-style deflation

Edmund "Ed" Conway, 20:45, Monday 24 May 2010

Britain is at risk of sliding into a Japan-style episode of deflation, and may be even worse-equipped than the Asian country to escape, a Bank of England policymaker has warned.

Hmm, let me think about this for awhile. No, no need to , I agree with Adam.

[Mikhail Liebenstein]

http://uk.finance.ya...d37062.html?x=0

MPC's Adam Posen warns Britain at risk of Japan-style deflation

Edmund "Ed" Conway, 20:45, Monday 24 May 2010

Britain is at risk of sliding into a Japan-style episode of deflation, and may be even worse-equipped than the Asian country to escape, a Bank of England policymaker has warned.

Hmm, let me think about this for awhile. No, no need to , I agree with Adam.

RB, I've just posted this in the blog, we must have been reading Yahoo at the exact same moment.

I agree with the risk assessment, but don't necessarily agree with the outcome. My suspicion is that we'll see further devaluation, as with the MPC thinking like this they are bound to indulge in a little QE.

[Pick It Down]

http://uk.finance.yahoo.com/news/mpc-s-adam-posen-warns-britain-at-risk-of-japan-style-deflation-tele-a0ee93d37062.html?x=0

MPC's Adam Posen warns Britain at risk of Japan-style deflation

Edmund "Ed" Conway, 20:45, Monday 24 May 2010

Britain is at risk of sliding into a Japan-style episode of deflation, and may be even worse-equipped than the Asian country to escape, a Bank of England policymaker has warned.

Hmm, let me think about this for awhile. No, no need to , I agree with Adam.

These clowns must have a VI because they can always print.

They know they can print.

We know they can print.

They know that we know they can print.

They just know that we know that the idiots out there don't know what printing is, nor do the Danny Blanchflower's, or anyone that matters.

In other words, we're right, but who gives a shit? So long as the majority and Dickhead Blanchflower's don't agree, they can do whatever the hell they like.

One day they'll find so can we.

['Bart']

Adam Posen , a member of the Bank's Monetary Policy Committee

Sorry, that's when I stopped paying any attention to what he was saying.

[Realistbear]

RB, I've just posted this in the blog, we must have been reading Yahoo at the exact same moment.

I agree with the risk assessment, but don't necessarily agree with the outcome. My suspicion is that we'll see further devaluation, as with the MPC thinking like this they are bound to indulge in a little QE.

There is a lot of talk about deflation in the markets and the Bond market is showing every sign of heading into a deflationary cycle. IMO, its got to be the way after decades of inflation. As the economic cycle is cyclical it is obvious that deflation follows bursting bubbles. QE has not had an inflationary effect because of world oversupply and falling demand. Wages have been kept subdued and there is no capacity for higher prices. Thus houses must fall too.

[Pick It Down]

There is a lot of talk about deflation in the markets and the Bond market is showing every sign of heading into a deflationary cycle. IMO, its got to be the way after decades of inflation. As the economic cycle is cyclical it is obvious that deflation follows bursting bubbles. QE has not had an inflationary effect because of world oversupply and falling demand. Wages have been kept subdued and there is no capacity for higher prices. Thus houses must fall too.

QE is very easy to keep up.

[Sir Sidney Ruff-Diamond]

QE is very easy to keep up.

QE will not have the effect that the MPC wants however - if wages don't rise, the inflation from QE will only make people less able to repay their jumbo home loans.

I missed that at first but we should remain very conscious of this - inflation won't save the housing market - it will kill it

[OnlyMe]

QE will not have the effect that the MPC wants however - if wages don't rise, the inflation from QE will only make people less able to repay their jumbo home loans.

I missed that at first but we should remain very conscious of this - inflation won't save the housing market - it will kill it

It will also kill any chace of getting manufacturing back or any semblance of a balanced economy, but then this is all about inflating assets to spare the banks their blushes from blatant scamming of the system and allow them to carry on in the way they have grown accustomed to.

[Realistbear]

QUOTE from article

The warning may come as a surprise to some, since last week the Office for National Statistics revealed that the Retail Price Index measure of inflation had risen to an 18-year high of 5.3pc. However, there is a growing number of economists who fear that the current relapse of financial stress could spark a global double-dip recession.

Double dip was always going to happen as the bank bail out bought time, nothing else. The inevitable must happen. I am afraid house prices are overdone melba toast.

Next we will have the goldbugs saying deflation will send gold prices to the moon (and back?).

[Realistbear]

QE is very easy to keep up.

Not so sure. QE will be checkmated by the bond market. Too much QE and IR soar undoing any chance of recovery and tanking the housing market perhaps too much. But then again.....

[plummet expert]

[

Edmund "Ed" Conway, 20:45, Monday 24 May 2010

Britain is at risk of sliding into a Japan-style episode of deflation, and may be even worse-equipped than the Asian country to escape, a Bank of England policymaker has warned.[/indent]

Hmm, let me think about this for awhile. No, no need to , I agree with Adam.

I agree with Adam too. We are worse-equipped than the Japs - The ONLY reason Japan has been able to raise the borrowed funds it needs month on month despite deflation for over 10 yrs, is that most of it is bought ...by the Japanese ...well, about 75%. They now have a borrowing of over 200%GDP - just a trifle worrying, but still they could always reschedule?? Japs like 1 or 2% bonds in their own currency when their bank rates are zero.

The Brits will not buy anything like that %. Neither would any western country. So, if we make it to the land of deflation, then we will find no gilts sold at the auction and its the IMF and even more cuts for us.

[Injin]

Quite why any of you think there is a plan beyond "print more money and get the ****** out of risky assets, lie to the punters for as long as they will buy it" I have no idea.

There is not now, never has been and almost certainly won't be any deflation whatsoever until the system has completely collapsed.

[The Masked Tulip]

I think QE and low IRs is quietly killing pensioners and those who rely on savings such as the sick, those who are carers.

You will be surprised how many people work hard, save money and then find themselves carers - unable to get a penny in benefit and forced to use their savings.

I think the above is all the silent tragedy of this 'economic policy'.

[interestrateripoff]

RB, I've just posted this in the blog, we must have been reading Yahoo at the exact same moment.

I agree with the risk assessment, but don't necessarily agree with the outcome. My suspicion is that we'll see further devaluation, as with the MPC thinking like this they are bound to indulge in a little QE.

Isn't that what Japan did but it didn't help, or are you anticipating that we'll print a larger amount than Japan to guarantee inflationary growth?

[Injin]

Isn't that what Japan did but it didn't help, or are you anticipating that we'll print a larger amount than Japan to guarantee inflationary growth?

japan exported their inflation.

There is nowhere for sterling, the dollar, the remnibi, the euro etc all to inflate to at the same time.

Anyone who tells you it's deflation wants you to sit there and eat their losses or is trying to make excuses for the inevitable further printing.

[CHF]

japan exported their inflation.

There is nowhere for sterling, the dollar, the remnibi, the euro etc all to inflate to at the same time.

Anyone who tells you it's deflation wants you to sit there and eat their losses or is trying to make excuses for the inevitable further printing.

If japan exported their inflation to countries such as the uk why cant other countrie soak up ours? Those such as africa, indonesia, s america

[Injin]

If japan exported their inflation to countries such as the uk why cant other countrie soak up ours? Those such as africa, indonesia, s america

Because they japanese are already there.

[The Masked Tulip]

To be frank, I think there is a third option that we don't talk about other than inflation or deflation - default.

I think countries will default. Argentina did in, what, 2001? How long before Greece does likewise? Then Ireland? The other PIGS? Us?

The problem with default is that people with savings in the bank suddenly find themselves getting pennies on the Pound... as the Argentinians found out to their cost in the years following 2001.

A growing fear I now have is that the UK will also eventually default and all us HPCers with savings will be wiped out whislt those with houses will find themselves 'better off'.

If Greece defaults I am buying a house - problem is, I fear a Greek default will be followed rapidly, too rapidly, by others.

[Guest spp]

You fail to understand how it's printy printy all the way until it becomes a deflationary collapse RB. Yes we will get deflationary bumps in the road (that's why they print).

If they are reckless enough it will be a hyperinflationary collapse.

Either way Gold and Silver will be the best stores of wealth until they conjure up a new currency, into which you can then exchange your metal.

You don't after be faster than the bear...just faster than the slowest camper.

You my furry friend will be left rustling in the trees as the slowest camper escapes shouting "Gold is in a bubble".

Edit : The masked one above me is starting to get it...

Edited May 24, 2010 by spp

[The Masked Tulip]

Not likely when the debts are denominated in your own currency.

If you have a shortfall you (the central bank) decide that printing money to replace that shortfall is better than default and the pain that causes...i.e. 'monetization' of debts.

And when you 'monetize' it is in 'rocket fuel' or central bank 'base money' that can be levered up many fold by private banks when the time comes.

That is what the hyperinflationists fret about.

Argentinians got 30cents on the (1) peso - basically a third. The Middle Classes of Argentina were effectively wiped out. Only a few months ago did they get offered about 5 cents more after years of protests.

[Mikhail Liebenstein]

QE will not have the effect that the MPC wants however - if wages don't rise, the inflation from QE will only make people less able to repay their jumbo home loans.

I missed that at first but we should remain very conscious of this - inflation won't save the housing market - it will kill it

There are two types of inflation really, the one that sees higher personal incomes, and the one that sees higher personal outgoings.

Ultimately though inflation will win, as we just need to appoint Mr Mugabe to the treasury.

[OnlyMe]

Obviously, not pissing all your money up against the wall is being reckless. At every step the central nutjobs are trying to micromanage every part of the econmy as if they know best, worked well so far - not.

When are these ******* going to stop playing God, bet hardly any of them have run anything with their own time/money.

http://business.timesonline.co.uk/tol/business/economics/article7135549.ece

MPC member warns on company cash hoards

Grainne Gilmore, Economics Correspondent

Businesses hoarding large surpluses on their balance sheets for a prolonged period could leave Britain facing a toxic mix of weak growth and high inflation, a policymaker at the Bank of England warned last night.

[The Masked Tulip]

I am bumping this because... well, it is an interesting thread and does not deserve to linger on Page 2 so early...

I'll get my coat.

[A.steve]

And when you 'monetize' it is in 'rocket fuel' or central bank 'base money' that can be levered up many fold by private banks when the time comes.

That is what the hyperinflationists fret about.

I concur, I think that's what hyperinflationists fret about, too. I don't think it's a very sensible view, however.

japan exported their inflation.

Agreed.

There is nowhere for sterling, the dollar, the remnibi, the euro etc all to inflate to at the same time.

Agreed.

Anyone who tells you it's deflation wants you to sit there and eat their losses or is trying to make excuses for the inevitable further printing.

Erm... disagree, strongly, for several reasons. Obviously, I think it extremely unlikely that everyone arguing deflation is doing so for the same reason - and, more specifically, my views fall into the deflationist camp... but I am definitely not arguing for easing of any kind. In fact, I think we can only begin to see a recovery once we've seen tighter conditions for long enough for them to be judged likely to last indefinitely.

I suspect that fear of deflation is disproportionate to its net impact. Just as, in a boom, economic conditions favour one demographic over another - so, too, in a deflation. As it stands, we're in a very weird situation... where wages (and the cost of survival) have been pushed extremely low relative to the price of assets. In my view, that's unsustainable, and it must correct, in the medium term, in some way. I think it extremely unlikely that wage inflation will be the mechanism... especially not with a progressive tax system which nominally penalises high earners (not that I'm saying this is right or wrong - just recognising how the system works.)

Perhaps the confusion comes from different assumed definitions of 'deflation' - so, I'll try to be clear what I mean. By deflation, I mean the falling price/valuation of all assets in nominal terms. I find it entirely possible that the cost of living will rise during a deflation - but that this won't be offset by capital gains. This gels with my interpretation of the 40% CGT move... assuming it isn't implemented on past gains... passed after the peek... this new tax is likely to raise little revenue - since gains will be accounted to have materialised during the 18% CGT era. I'm not an accountant - I'd be interested to hear opinions on how realistic this hunch might be.

[AvidFan]

Here's his full speech if you can get the link to work:

http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/v6xbGisEfS.k.asf&vCat=/av&RND=964096296&A=http://media2.bloomberg.com/ads/forex/fxpro_304x224_200.wmv

He argues that Japan still had plenty of capacity to grow post-1989, including women going to work and additional public sector spending. It was only sonsumption tax in the late 90's and cuts in public spending in the 2000's that pushed their economy down twice.

Since we're going to get the same - spending cuts and a VAT rise, I can see his point.

I've listened to it for about 35 minutes and then the feed died. The camera does pan onto the powerpoint he's talking about, but only from about 18 minutes in, so you miss the first slide of Japan's GDP versus year post-crash.