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Realistbear

Deflation Trend Picks Up In U S

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http://www.bloomberg.com/news/2010-07-16/treasuries-head-for-weekly-gain-before-data-to-show-consumer-prices-fell.html

Treasuries Rise as Asian Stocks Decline Before U.S. Consumer Prices Report
By Keith Jenkins and Wes Goodman - Jul 16, 2010
Treasuries rose, headed for a weekly gain, as Asian stocks slid and economists said government figures today will show a
U.S. inflation gauge matched the lowest in four decades last month.
The 10-year note advanced for a third day, two-year yields were near a record low and traders cut bets on inflation for a third day. Former Bank of England policy maker David Blanchflower said the risk of a deflation “nightmare” means officials including Federal Reserve Chairman Ben S. Bernanke should keep measures in place to spur growth.
“Treasuries are stronger as equities headed lower in a risk-off environment,” said Peter Chatwell, an interest-rate strategist at Credit Agricole Corporate & Investment Bank in London. “Treasuries benefit in bouts of risk aversion or stock- market weakness, as investors seek the safest assets.”

If we have a 4TR black hole here how much larger must it be in the US? Perhaps it is time to accept that there is another aspect to the inflationary cycle.

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We debate a lot on here about monetary policy. But its really pretty simple. The fed has a mandate to have an annual inflation of ~2%. If the inflation rate is ~1% and trending strongly down, then the fed has to look at ways of loosening monetary policy.

The next step is authorizing the expansion of the fed balance sheet to $5 trillion. Then spending that and seeing if that is enough to reverse the deflationary trend. If that is not enough the next step is expanding to $10 trillion, spending it and seeing if that is enough.

At some point the deflation trend can be broken if they are willing to do this.

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We debate a lot on here about monetary policy. But its really pretty simple. The fed has a mandate to have an annual inflation of ~2%. If the inflation rate is ~1% and trending strongly down, then the fed has to look at ways of loosening monetary policy.

The next step is authorizing the expansion of the fed balance sheet to $5 trillion. Then spending that and seeing if that is enough to reverse the deflationary trend. If that is not enough the next step is expanding to $10 trillion, spending it and seeing if that is enough.

At some point the deflation trend can be broken if they are willing to do this.

Can a deflationary trend be broken by deflating a currency?

The consequences will be depression as the bond markets will be in upheaval as each country tries to devalue its currency to remain competitive in a shrinking market. Deflation will feed on itself and the whole world could go Japanese. In tandem devaluation will be self-defeating in the global economy leaving the status quo or economic gridlock--like Japan. Mind numbing and difficult to predict exactly what would happen.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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