Wednesday, May 28, 2008

Inflation v Deflation: both at the same time but in different regions

Back to the 1970s, or the early 1920s?

"We could see a reply of the early 1920s, when the world system split in half as they faced the policy ructions following the Great War. Could this divergence occur in a modern global economy with (mostly) floating currencies? The emerging world inflates into the stratosphere; the Atlantic economies and Japan go into a deflationary slide? "

Posted by sold 2 rent 1 @ 09:57 AM (1161 views)
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8 thoughts on “Inflation v Deflation: both at the same time but in different regions

  • planning4acrash says:

    how do you define deflation? Money supply can rise, with commodities & some assets, with prices rising overall, cost of living rising, whilst official CPI & RPI measures falling. Real deflation is a money supply contraction. Beware of false definitions.

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  • stillthinking says:

    It isn’t easy to see how the UK can inflate further, as in additional to the current spike, if house buying dries up and unsecured lending is limited. The only large scale borrowing will be from the government. When the government props up banks this is equivalent to removing capital requirements, because they are not actually putting additional money into the banks. So only the government is left, and the only reason that the government will borrow is because we are entering a recession. Gov. borrowing will be paired with the recession. As soon as the recession gets underway credit will be destroyed because of an inability to service the repayment. As has been mentioned, the government is already in debt and taxes are already high, they cannot stimulate the economy. That they are -forced- further into debt will not be an economic stimulant.
    If inflation is due to an expansion in the money supply from credit, and people stop borrowing, where is the inflation going to come from? There is also a change in the national consciousness away from borrowing towards saving, to make things worse. As Soros has said, the BoE cannot lower rates at the moment, and can only lower rates when demand collapses. By which time it is too late.
    I can see we have inflation now, but where are continuing inflationary factors coming from ? Inflationary factors look like they are on their last legs. Also, what King says and his attempts to set expectations are in accordance with a fight against deflation, not inflation.
    ????????????????

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  • planning4acrash says:

    Still thinking. You still remain in the mindset whereby you believe that Joe public has any control over monetary issues. The money supply has boomed as the government has created bonds to bail out banks, including Northern Rock, to the tune of hundreds of billions of pounds. The monetary system is a continuous batton race relay, where one bubble takes over from another. The money supply is going into commodities now, and that bubble has miles to go, with banks like JP Morgan targetting $200 oil. So the commodities party has only just begun. To follow from that, lies about supply and demand ensure that a renewable energies/sustainable technology bubble can follow, similar to the dot.com bubble, so money can flow back into stocks and shares, with a higher cusion to to the commodity bubble, and George Dirty Soros has indicated that Gold is ready to take off. Note of course that hundreds of billions are about to be sunk into an Iran war and it is likely that this would escalate into a pan Middle East war. The military industrial complex are running out of customers with the Iraq war beginning to plateau. Expect another white flag event, possibly in the first yr of the next presidency to justify Iran. Or, maybe something this summer so that Bush can initiate a mess for the next president.

    The scene is set for massive monetary expansion and our currencies have potential to fall hard. Stillthinking, I wish your naieve world view were true, but it is time to wake up and smell the coffee, our way of life is under attack on a level not seen before.

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  • stillthinking says:

    Its naive not naieve. I don’t believe that there will be a war with Iran. Also, I don’t think that excessive government borrowing necessarily staves off deflation,as the Japanese example of 160% gdp debt seems to show. The money issued to NR is backed by the debtors of NR and although I think there will be losses it won’t be anywhere near the full amount. So I don’t think that government borrowing is so high and I don’t think that government borrowing replaces the lack of borrowing by the general public. FTBs put 50% of their disposable income to mortgage payments, if the government borrowed sufficient to match the general population they would be unable to ever repay the debt and would eventually default. The huge debt is -now-, not coming, and the only way that these debts can be paid off would be if debt expanded further at a regular pace every year.
    UK personal debt is 1409 billion http://www.creditaction.org.uk/feb.html . How can the government replace this level of borrowing ? 100 billion to NR doesn’t come near. This debt needs to be maintained and increased at 2% every year, but new lending is 40% down, while repayments continue. Lending is not keeping up with the amount required to facilitate paying back the existing loans or to maintain 2% inflation.
    The basic problem is that we are over borrowed as things are now, both public and government. Hence current inflation. But the point is surely whether or not this continues. Massive monetary expansion by the government is a tacit admission of a deflation problem anyway.
    However, I could be wrong of course. This is just my opinion.

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  • planning4acrash says:

    You are a fool to even think about justifying a Northern Rock bail out that is equal to the clean up of decommissioned uk nuclear sites and replacement of Our nuclear arsenal, COMBINED. And who cares about a poxy spelling error. Wake up!

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  • planning4acrash says:

    There are public documents showing that the Bush administration want to bomb Iran. There is proof that they have already planned it. Uk ministers are on record refusing to rule out force. Wake up!

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  • sold 2 rent 1 says:

    P4AC,

    I agree that the US are planning another false flag operation at the start of a presidency.
    They did this with Clinton (WTC bombing 1993, then Oklahoma) and Bush (WTC 9/11)

    The change of consciousness coming up will mean that this will not be repeatable for a third time.
    Come on Ron Paul

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  • planning4acrash says:

    Or, we get an atrocity so aweful, that people expose it straight away, and, having got away with 9/11, governments get lazy and make glaringly obvious mistakes.

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