Saturday, October 2, 2010

Outright deflation (for now)

America's recovery 'wholly unsatisfactory', says top Federal Reserve official William Dudley

The Federal Reserve has said it is prepared to add to its unprecedented blitz of money printing, and the markets will be watching the bank's meeting early next month.

Posted by devo @ 08:34 AM (1310 views)
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15 thoughts on “Outright deflation (for now)

  • “Insanity: doing the same thing over and over again and expecting different results.”
    -Albert Einstein

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  • This isn’t about fighting deflation, and it probably never was. It’s about creating & increasing the rate of inflation, the new job of the FED; and in the UK, BOE is doing the same thing. Time to get out of GBP.

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  • “Time to get out of GBP”

    I got a large proportion of my cash out of the £ a while back and have outperformed inflation on that transaction alone…

    …am I allowed to say that?

    …How about them there house prices, ay?

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  • …am I allowed to say that?

    I don’t see why not. I just think it’s going to accelerate, significantly.

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  • …How about them there house prices, ay?

    They will appear almost static, as the value of the pound plunges.

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  • “I don’t see why not. I just think it’s going to accelerate, significantly.”

    What is going to accelerate, significantly? House Prices?

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  • mark wadsworth says:

    Estrader, on a purely practical level, which bank should I use for holding foreign currencies? When I had JPY and AUD I had accounts with Citibank but I’m a bit nervous about banking with foreigners nowadays.

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  • What is going to accelerate, significantly? House Prices?

    Sorry, should have been clearer – inflation. The rate at which commodity prices is accelerating is scaring the hell out of me.

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  • I think Barclays offer foreign currency accounts.

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  • Mark,

    I wouldn’t want to advise you on that because currencies are not my thing, I just figured I had to get my money out of the £. I am using a foreign Bank account simply because it is one I have had and maintained for donkey’s years. It seemed like a wise move at the time (and has turned out to be one so far) and the interest rate on short fixed term deposits is above 5%. However the government guarantee on deposits isn’t permanent like in the UK and U.S. So I will be doing something else when the guarantee expires, even though I trust the system, you never know!

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  • EST 1 – correct. Does that apply to saying the same thing over and over, although the reality is staring you in the face?

    Right so lets deal with the article

    Essentially what has happened since (and not including) the 1930s is that every time we have had a recession we have recovered from it by inducing more debt. After each recession there has been a mini boom – if you like when the economies then catch toward trend growth. However the mini boom has become more anaemic as time has gone on and as debt levels have risen past the prior peak of debt levels.

    To where we are today. We have never had debt at the levels experienced today in history. In the states at the end of the roaring 20s debt was 1.7 x GDP, whereas recently debt has been up to 3 x GDP.

    So what they are doing is trying to create another debt induced growth cycle. But despite the unprecedented stimuli and expansion of BASE money, BROAD money (in the US) is still contracting as there is more de-leverage.

    What i dont understand is why people just keep saying this will produce inflation over and over without trying to understand why as yet it hasnt. I mean in the textbooks what happens is the multiplier kicks in and banks lend more and create money, Yes there is a lag built into the model….. but even so why hasnt it happened yet?

    As for the Euro Le crunch asked me if i was still a dollar bull the other day. And yes – unless it goes past a certain point on the charts then i am. However i am not a short term dollar bull as i suggested to Mr. Fibble the pound (cable) looks good to me at the moment, (and i am + Euro @ 1.33 and change). However once the market turns (excepting “that”point) then i think the dollar is going to go on leaps and bounds correlated to heavy stock market falls. Re the stock market i have admittted (and its cost me some cash) that i have been wrong about how much its gone up.

    I could use POMO and a thousand other things as an excuse, but basically i have got it wrong and every toe-dip (apart from my latest whole foot dip) has been munched by the piranhas :).

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  • However once the market turns (excepting “that”point) then i think the dollar is going to go on leaps and bounds correlated to heavy stock market falls.

    Like UK house prices then, should be falling, but simply isn’t.

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  • no such thing as “should be”.. is what it is, until it isn’t and then its something else. if someone says it “should be” then that means they are aligning the market with what they think not aligning their thoughts/actions with what the market thinks or does. Thats why fundamentalists have such a hard time and thats why the EMH has been debunked.

    A subtle difference to saying “i think it will”… or even “im surprised it hasnt”.

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  • Actually a lot of people have been talking about, and predicting, ”heavy” stockmarket falls especially over the past year. As yet, they haven’t materialised and I’m not sure they will – especially after hearing what I have been hearing this morning – but this all probably depends upon FED action.

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  • fair comment hpw…. and short term you are right re the fed action, but probably only for a few hours / days or weeks. By which time admittedly the market could be a lot higher / lower.

    From an EW perspective, SOME think that we will have falls because counter-trend moves are in 3s, although thats a simplification, and there was a wide range of probabilities as to where the bear rally ends and since the next move according to the theory will be the biggest, they have taken some bites on the way up (the higher it goes the better the odds of at least a short term correction). Other technicians think its overbought on every indicator and that there is divergence with oscilators.

    I cant personally see big falls when the $ is tanking, but we shall see. There could be a top a move down, and a recovery on a lower dollar before both turn to the downside. So a number of combinations might happen…. and then again they might not!

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