Deflation It Is--There Is No Longer Any Doubt

[InternationalRockSuperstar]

When bubbles deflate deflation is the result

not if the bubble that's bursting is the national currency and sovereign debt.

[urban_hymn]

Theyll try as hard as possible to keep prices static but the hoards will hold and deflation it will be.

Our passage through the depression will be eased by cheaper food, fuel, rent etc?

Life's not like that. In my experience, when you're down you get kicked some more.

My bet's on inflation.

Edited May 27, 2010 by urban_hymn

[57percent]

We've had a massive credit expansion for the last 10 years, so yes, the obvious future is deflation.

I think we'd be seeing that now if it wasn't for the QE.

The QE was intended for the banks balance sheets. They were mostly insolvent. By strengthening their

balance sheets they are in a position to lend again and protect against deflation. (* I have a feeling

a lot of this money has been distributed as bonuses so far)

We're now at the next step. It's not that the banks don't want to lend, but people don't want

to borrow. If people don't borrow it's hard to avoid deflation without buying stuff for them.

The whole world seems to have shifted away from more govt spending, so very difficult to see where the

borrowing/spending will come from.

(I still have some gold and don't think I'll sell)

[Guest The Relaxation Suite]

If true (and I'm sure it is), that is a very revealing statistic.

Its always a good idea to take a step back and look at things in a long-term historical perspective. I've only known the last 40 years or so, so to me inflation seems a normal state of affairs.

Thank you Tecumseh, you've made me think again...

Hi Mr Yogi

You might like this, in that case:

http://www.city-journal.org/2009/19_3_otbie-inflation.html

To the poster claiming we're off to Weimar, I don't think so. The poster above who taled about plebs hoarding had it right. This is no longer being directed by governments and banks. People have got the wind up and they're going to shut down spending and see what happens. It's human nature. Britain will turn into Japan before it turns into Zimbabwe or Weimar.

If prices go up by the same amount over the next 40 years then an average house will cost something (off the top of my head) like £2 million. This is not an option and neither is people wallpapering their homes with £50 notes.

Edited May 27, 2010 by Tecumseh

[Realistbear]

We've had a massive credit expansion for the last 10 years, so yes, the obvious future is deflation.

I think we'd be seeing that now if it wasn't for the QE.

The QE was intended for the banks balance sheets. They were mostly insolvent. By strengthening their

balance sheets they are in a position to lend again and protect against deflation. (* I have a feeling

a lot of this money has been distributed as bonuses so far)

We're now at the next step. It's not that the banks don't want to lend, but people don't want

to borrow. If people don't borrow it's hard to avoid deflation without buying stuff for them.

The whole world seems to have shifted away from more govt spending, so very difficult to see where the

borrowing/spending will come from.

(I still have some gold and don't think I'll sell)

Nail on head. Market momentum is lost and deceleration takes on its own deflationary momentum. Like Japan.

[lowrentyieldmakessense(honest!)]

Nail on head. Market momentum is lost and deceleration takes on its own deflationary momentum. Like Japan.

confidence in the paper currency is over

collapse in its perceived value follows - just watch

Edited May 27, 2010 by lowrentyieldmakessense(honest!)

[Sourman]

Depression Mark II

So tell me about all of the great deflationary events of the past 100 years.... what are you basing your amazing claims on? How is it you and almost everyone here seems to know what effect deflation will have?

What happened to Japan between '95 and now? Did millions of ordinary people suffer and starve? How bad was it?

No idea? Surely you must all know something and are keeping it to yourselves, because as far as I can see you are just reciting worn and tired maxims of the capitalist mantra.

This board is so full of VI's it's hilarious.

[ken_ichikawa]

Nail on head. Market momentum is lost and deceleration takes on its own deflationary momentum. Like Japan.

If the people don't want to borrow money themselves the government will borrow the money on their behalf.

The massive massive cuts you mention are completely overshadowed i.e. 6bn of cuts this year, except we have to loan the euro zone 15bn and also borrow 150bn anyway.

[Guest The Relaxation Suite]

So tell me about all of the great deflationary events of the past 100 years.... what are you basing your amazing claims on? How is it you and almost everyone here seems to know what effect deflation will have?

What happened to Japan between '95 and now? Did millions of ordinary people suffer and starve? How bad was it?

No idea? Surely you must all know something and are keeping it to yourselves, because as far as I can see you are just reciting worn and tired maxims of the capitalist mantra.

This board is so full of VI's it's hilarious.

I don't think we're looking at dust bowl stuff, just a cooling of asset prices as they have got so far out of reach of ordinary wages. Also, we're at the stage that psychology starts to take over from accountancy. People are scared, and when people are scared about the future do they spend more or less?

[lowrentyieldmakessense(honest!)]

I don't think we're looking at dust bowl stuff, just a cooling of asset prices as they have got so far out of reach of ordinary wages. Also, we're at the stage that psychology starts to take over from accountancy. People are scared, and when people are scared about the future do they spend more or less?

they spend more on food when they expect it to cost more next week

[Realistbear]

So tell me about all of the great deflationary events of the past 100 years.... what are you basing your amazing claims on? How is it you and almost everyone here seems to know what effect deflation will have?

What happened to Japan between '95 and now? Did millions of ordinary people suffer and starve? How bad was it?

No idea? Surely you must all know something and are keeping it to yourselves, because as far as I can see you are just reciting worn and tired maxims of the capitalist mantra.

This board is so full of VI's it's hilarious.

I sense there are some inflation hedge VIs around who believe certain commodities have value independent or market forces. There are also quite a few VIs who are waiting for cheaper houses--and I am one of them.

[bendy]

Our passage through the depression will be eased by cheaper food, fuel, rent etc?

Life's not like that. In my experience, when you're down you get kicked some more.

My bet's on inflation.

You’re a pleb, so no… though I don’t see the horror inflation that is reported. Food prices have to stay static or at least not become untouchable to the (below) average person.

Put yourself in this situation – you’re rich, wildly rich, do you want to risk losing all this? (Printing is a double edged sword and they all know this).

[Realistbear]

Japan are still "suffering" from deflation more than 2 decades on from their wonderful HPC:

http://finance.yahoo.com/news/Japans-exports-jump-40-apf-1956117986.html?x=0&sec=topStories&pos=4&asset=&ccode=

...../

Robust global demand, particularly in Asia, is feeding a turnaround in Japan's economy -- the world's second-largest -- offsetting weak demand and

falling prices at home

. Japan's exports to Asia alone account for 56 percent of total shipments.

"We should not fear deflation but embrace it." RB

[ken_ichikawa]

You’re a pleb, so no… though I don’t see the horror inflation that is reported. Food prices have to stay static or at least not become untouchable to the (below) average person.

Put yourself in this situation – you’re rich, wildly rich, do you want to risk losing all this? (Printing is a double edged sword and they all know this).

Again the rich and the elites have ways in which to protect their wealth.

Bob Mugabe is an excellent example, he bought a $5mil property in Hong Kong in 2006, his wife regularly spends $100K on shopping trips, and yet Zim is in a hyperinflationary collaspe.

[ken_ichikawa]

You’re a pleb, so no… though I don’t see the horror inflation that is reported. Food prices have to stay static or at least not become untouchable to the (below) average person.

2008 tins of soup were around 42p, last week no tin of soup other than the lowest quality own brand stuff was below 60p.

Must be deflation eh?

Petrol prices in 2008 ignoring the uberspike I remember used to be below £1/litre. Yet it costs me £1.18 for a litre.

More deflation eh>?

[soldintime]

how the hell have you concluded that inflation must be followed by deflation?

Weimar had 1000% inflation, then another 1000% inflation, then another 1000% inflation, then another 1000% inflation, then another 1000% inflation, then another 1000% inflation, then another 1000% inflation, then another 1000% inflation, then another 1000% inflation, then another 1000% inflation, then another 1000% inflation..

...then currency repudiation.

Weimar had nothing to do with the massive credit expansion we are experiencing now, It all had to do about war payments forced upon Germany after WW1 that were unpayable. So they inflated their way out of it. That same inflation they experienced then is now being used to demand austerity all over the euro zone. This has deflationary effects.

[lowrentyieldmakessense(honest!)]

Weimar had nothing to do with the massive credit expansion we are experiencing now, It all had to do about war payments forced upon Germany after WW1 that were unpayable. So they inflated their way out of it. That same inflation they experienced then is now being used to demand austerity all over the euro zone. This has deflationary effects.

what about the trillion euros last week

[soldintime]

So tell me about all of the great deflationary events of the past 100 years.... what are you basing your amazing claims on? How is it you and almost everyone here seems to know what effect deflation will have?

What happened to Japan between '95 and now? Did millions of ordinary people suffer and starve? How bad was it?

No idea? Surely you must all know something and are keeping it to yourselves, because as far as I can see you are just reciting worn and tired maxims of the capitalist mantra.

This board is so full of VI's it's hilarious.

The credit expansion in Japan was mainly driven by the banks to companies. Hence the nikkei at 40000 (today still just above 10000). The Japanese were saved by the savings ordinary people made and there ability to export as a nation. Signs of deflation there are: House price down turn, debt to GDP of 200%+, no wage growth, low birthrate, lower prices every year.

I do think Japan will also be one of the first countries experiencing the turn from deflation to hyper inflation. this when people realise they can not ever repay back their debt and demand higher interest rates.

[soldintime]

what about the trillion euros last week

The trillion euros is money from good countries send to help bad countries. The effect is:

* Money not available to be spent in strong economies - deflationary effect

* Austerity demanded to the PIGS. We have seen 3 releases of this last week. Spain, Portugal & Italy all proposed immediate budget cuts. The IMF demanding it is not enough. Deflation in action.

[Harry Sacks]

The examples of hyperinflation constantly repeated here omit one important fact - they occurred in countries with no significant bond market.

[TheCountOfNowhere]

Simple logic would dictate that as the world's largest ever stimulus ended in the present deflationary situation, the next one will as well. Deflationistas might have to raise a glass soon and toast their prescience.

I vote for you as chancellor of the exchequer. You seem to have some grasp on reality

[Tired of Waiting]

http://uk.finance.yahoo.com/news/us-money-supply-plunges-at-1930s-pace-as-obama-eyes-fresh-stimulus-tele-96953538b23a.html?x=0

US money supply plunges at 1930s pace as Obama eyes fresh stimulus

Ambrose Evans-Pritchard, 22:19, Wednesday 26 May 2010

The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.

Paul Ashworth at Capital Economics said the decline in M3 is worrying and points to a

growing risk of deflation.

"Core (Berlin: LJ1.BE - news) inflation is already the lowest since 1966, so we dont have much margin for error here.

Deflation becomes a threat if it goes on long enough to become entrenched,"

he said.

Analogous to the situation where a bubble bursts sucking everything around it into a black hole. Deflation, once it has traction, is very hard to reverse as Japan has discovered. Fiscal stimulus can only do so much and in a contracting economy demand falls and credit disappears causing prices of assets to collapse. The last remaining bubbles are about to pop so be careful out there if you have too much in metals.

And another thing...house prices are well done Melba toast that needs the charred bits scraping into the sink.

You probably agree that governments don't want deflation. The question is if they have the power to avoid it. Right?

So, what stops them from simply increasing Quantitative Easing (QE) ?

[ken_ichikawa]

The examples of hyperinflation constantly repeated here omit one important fact - they occurred in countries with no significant bond market.

Except you can print money to buy your own bonds.

[urban_hymn]

Put yourself in this situation – you’re rich, wildly rich, do you want to risk losing all this? (Printing is a double edged sword and they all know this).

Eh? If you're wildly rich you buy stuff - gold, commodities, agricultural land etc. and then you can say "print and be damned".

[lowrentyieldmakessense(honest!)]

The trillion euros is money from good countries send to help bad countries. The effect is:

* Money not available to be spent in strong economies - deflationary effect

* Austerity demanded to the PIGS. We have seen 3 releases of this last week. Spain, Portugal & Italy all proposed immediate budget cuts. The IMF demanding it is not enough. Deflation in action.

eh

people on the streets will be demanding money - those in charge will oblige just to keep their heads a little longer

a fall in value in overleveraged assets - yes for a while

an increase in prices for things people need - food, water, energy

deflation isnt going to happen with paper/digital money