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wonderpup

The Great 'deflation V Inflation Debate

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I've been around here long enough to remember some fairly long and bitterly fought debates as to the near term future of QE and Zirp- with a fairly evenly divided range of views on both sides, running from out of control hyperinflation that eats the world all the way down to a deflationary black hole leading to total collapse of demand as everyone waits for ever to make their next discretionary purchase of whatever tickles their fancy.

Am I right in now concluding that-in the near term at least- the deflationistas have won this debate? Are there any diehard hyperinflationists left out there?- or are we all on the same page in expecting a short term deflationary 'event'?

The buzz at present is that 'helicopter money' is the next act in this tragicomedy, wherein the central bankers abandon their attempts to goose the 1% into saving the world and instead inject cash directly into the veins of the dying 'consumer economy'- if this madness actually comes to pass will this finally bring into being that long predicted hyperinflationary tsunami? Or will those debt sodden consumers instead direct their windfall toward debt repayment and so merely deepen the deflationary trough?

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I agree in the short term, deflation is in the driving seat. Not sure how we square that with all of the asset inflation we have had (mainly London houses!). However, I am sure that inflation will come back at some point and who knows what measures will be deemed fit by the CB's once the next deflationary bust hits! I see hyperinflation a bit of a long shot though, I guess it's not impossible, but I think a bit of high inflation and all of the problems that would come with it, would be enough to get the CB's changing their minds pretty quick.

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The buzz at present is that 'helicopter money' is the next act in this tragicomedy

Helicopter money is in diametric opposition to the agenda of the current PTB, I mean a policy that would transfer wealth from the asset holders and the banks and finance sector to normal working people ?? you cant seriously see them doing that can you ?.

An idealogue like corbyn maybe, the current lot of corporocrats ... I highly doubt it.

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Helicopter money is in diametric opposition to the agenda of the current PTB, I mean a policy that would transfer wealth from the asset holders and the banks and finance sector to normal working people ?? you cant seriously see them doing that can you ?.

An idealogue like corbyn maybe, the current lot of corporocrats ... I highly doubt it.

exactly! helicopter money destroys their fractional reserve debt system. Why would the bankers commit suicide when they have already sacrificed the economy to save themselves?

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we will get hyperinflation when the deflation (bond yields to zero and below) inevitably gets defaulted on. When servicing the debt finally kills off the economy. Then people will reject the currency that was born of the debt that is now being defaulted upon, and that's hyperinflation. imo

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We are in an ERA of disinflation and possibly deflation.

It should tick up as oil crash falls out of annual index.

But Recession will take us down again and into deflation...hence QE4...

#turningjapanese

Edited by Killer Bunny

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No helicopter money, so deflation then stagnation, possibly rate rises, defaults then eventually some growth.

Helicopter money won't help in anyway, it will cause a currency crisis, yes inflation but lots of bankruptcy, shortages and real hardship.

Cheap money will never work if everyone is doing it. The only way is less debt and more money kept in circulation rather covering bad debts and keeping banks afloat.

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Helicopter money is in diametric opposition to the agenda of the current PTB, I mean a policy that would transfer wealth from the asset holders and the banks and finance sector to normal working people ?? you cant seriously see them doing that can you ?.

An idealogue like corbyn maybe, the current lot of corporocrats ... I highly doubt it

They are desperate however to preserve the vast edifice of fictitious capital that represents much of their current wealth and power- if showering the plebs with a short term cash fix will stave off the day of reckoning even for a short while the temptation will be strong to give it a go. It may be our debt but it is their wealth- and they are rather attached to it.

QE et al. has always been about trying to somehow pretend that the bubble wealth of the past two decades was real and sustainable- to this end they have done things that only a few short years ago would have seemed impossible, like institute ZIRP. Given that why would they stop now?

What they did was build a deflation machine called Globalization and lubricated it with 'deregulation' and then handed the control of it to a bunch of sociopaths in the financial sector who then set about creating money for themselves and their cronies from the whole cloth of sweet FA- but once brought into being there is no way to unmake all this illusory 'wealth' without somebody feeling the pain of it's passing- and given the choice I believe they might just risk the hyperinflationary end game rather than part with a single f*cking penny.

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We are witnessing historic lows in money velocity, historic highs in money supply. It seems to me that a main reason why we have recently only witnessed strong inflation in house prices is the shale oil boom, which kept energy, transportation(!) and food costs low. So, the much-desired situation of price stability in cash-bought necessities (food, fuel) and inflation in debt-financed assets (houses, stocks) could continue.

Once the shale oil boom sputters out, it could turn very quickly into very nasty (hyper-)inflation. The vehicle for this would be an initial price shock in the necessities (see Saudi Arabia thread, etc.), answered by even more credit by the CBs - which then starts to chase necessities rather than the typical debt-financed goods. In the end, the currencies would simply cave in, after having taken an insurmountable load of financial abuse.

In short: The deflationistas got lucky so far, but the final judgement is out. However, I cannot see real deflation in anything where I live. So, the deflationistas' call was not exactly great either.

Edited by Silverfinger

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We had the hyperinflation on the run up to 2008. Seeing as all the new money was created as debt, at some point debt saturation occurs and the system crashes. QE only puts more pressure on the consumer by steering money into markets and causing artificial inflation, while real demand falls. And this is what we've witnessed. We will have deflation until such time as a new, all inclusive, debt binge happens. Like a new house price boom following a 50% crash.

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What deflation are you talking about?

CPI is a useless indicator.

Even the ONS has accepted that CPI understates inflation for low/middle incomes. And this does not even included cost of housing!

http://www.ons.gov.uk/ons/rel/elmr/variation-in-the-inflation-experience-of-uk-households/2003-2014/sty-variation-in-the-inflation-experience-of-uk-households.html

And it is known that essentials inflation is much much higher..

http://ftalphaville.ft.com/2013/02/20/1393672/the-real-rate-of-british-inflation/

So if you think we are in deflation, try to see how much the train costs/nursery costs and housing costs have jumped the last 8 years (since QE/ZIRP).

Dont listen to the crap propaganda by economists in white towers.

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What deflation are you talking about?

CPI is a useless indicator.

Even the ONS has accepted that CPI understates inflation for low/middle incomes. And this does not even included cost of housing!

http://www.ons.gov.uk/ons/rel/elmr/variation-in-the-inflation-experience-of-uk-households/2003-2014/sty-variation-in-the-inflation-experience-of-uk-households.html

And it is known that essentials inflation is much much higher..

http://ftalphaville.ft.com/2013/02/20/1393672/the-real-rate-of-british-inflation/

So if you think we are in deflation, try to see how much the train costs/nursery costs and housing costs have jumped the last 8 years (since QE/ZIRP).

Dont listen to the crap propaganda by economists in white towers.

Yes. And the past eight years of inflation were caused by QE. If this Stops we will have deflation.

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Not really.

-The increases might go out of the CPI calculator after 12 months, but there are still out there and are taking much of our disposable income.

-QE might stop but there is still ZIRP/FLS out there which are pumping ridiculous asset prices.

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What deflation are you talking about?

Exactly. The only deflation I have recently seen is in gas(oline) prices, and that was rather little so far. Everything else I pay for is steadily going up in price. All that with the lowest money velocity EVER. When (not if) this baby turns, it will be sooo hyper.

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Exactly. The only deflation I have recently seen is in gas(oline) prices, and that was rather little so far. Everything else I pay for is steadily going up in price. All that with the lowest money velocity EVER. When (not if) this baby turns, it will be sooo hyper.

Indeed. And energy bills seem to be very sticky when prices go down..

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What deflation are you talking about?

CPI is a useless indicator.

Even the ONS has accepted that CPI understates inflation for low/middle incomes. And this does not even included cost of housing!

http://www.ons.gov.uk/ons/rel/elmr/variation-in-the-inflation-experience-of-uk-households/2003-2014/sty-variation-in-the-inflation-experience-of-uk-households.html

And it is known that essentials inflation is much much higher..

http://ftalphaville.ft.com/2013/02/20/1393672/the-real-rate-of-british-inflation/

So if you think we are in deflation, try to see how much the train costs/nursery costs and housing costs have jumped the last 8 years (since QE/ZIRP).

Dont listen to the crap propaganda by economists in white towers.

of course, there is never uniform deflation or inflation. You can always find exceptions. But the big macro drivers, commodities (being decimated) and bonds (yields to zero) are showing hyperdeflation

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of course, there is never uniform deflation or inflation. You can always find exceptions. But the big macro drivers, commodities (being decimated) and bonds (yields to zero) are showing hyperdeflation

To effect a sustainable recovery asset prices and current prices have to be brought back into balance. Either asset prices fall dramatically, or current prices rise. Or both.

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To effect a sustainable recovery INCREASE IN asset prices and current prices have to be brought back into balance. Either asset prices fall dramatically, or current prices rise. Or both.

Corrected for accuracy.

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Hmm. My rent is the same, my natural gas + electricity bill has stayed approx. the same. All insurances have gone up. Grocery shopping seems to be about the same, baked goods have gone up though. Air tickets seemed more expensive this year, public transportation definitely went up. Diesel has come done, but I do not drive that much anyway. So, overall, I would say my cost of living has gone up. Not by a lot, but UP is the direction, not down.

Edited by Silverfinger

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Quoting myself here, not the best style, I know.

Kyle Bass just said the other day that interest rates will stay this low for the rest of our lives. I agree, because the opposite is unthinkable from a Draghi/Carney/Yellen point of view. So, there will be nothing to fight inflation when it comes, NOTHING! It will just rage.

Edited by Silverfinger

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