Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

[jk]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

No wage price inflation channel is assumed.

my point is more that very high unemployment means very low levels of demand, so that supply constraints are less likely to bite. otoh, if supply constraints are causing cost-push inflation, it implies a level of demand inconsistent with the very high levels of unemployment predicted.

it will take some time for a 20% u3 to emerge, even if we ratchet up [down?] to losing 1,000,000 jobs per month. but q3 is only a few months away.

trying to reconcile these ideas, it looks to me like the implicit prediction is for a false glow of health to appear with price rises in q3, with another leg down in the economy happening sometime thereafter, with the high unemployment achieved later, and with another sell-off in commodities likely to occur at that time.

is that what you have in mind?

[metalman]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

my point is more that very high unemployment means very low levels of demand, so that supply constraints are less likely to bite. otoh, if supply constraints are causing cost-push inflation, it implies a level of demand inconsistent with the very high levels of unemployment predicted.

it will take some time for a 20% u3 to emerge, even if we ratchet up [down?] to losing 1,000,000 jobs per month. but q3 is only a few months away.

trying to reconcile these ideas, it looks to me like the implicit prediction is for a false glow of health to appear with price rises in q3, with another leg down in the economy happening sometime thereafter, with the high unemployment achieved later, and with another sell-off in commodities likely to occur at that time.

is that what you have in mind?

my read on this jk is that we're going to see a nominal improvement in gdp in q3 2009 and a temporary recovery in unemployment. then things turn down again in q4. even if unemployment keeps rising and demand falls faster than supply... maybe credit for producers improves?... that sill leaves the other 8 ways of inflation.

what if the usa hits a wall on spending in the next fiscal spin cycle... in 2010?

the more i read this stuff the more clear to me it is that there are so many variables at work... market and political and random... who really knows what the hell is going to happen? whatever it is, a 1930's deflation spiral or 1990's japan deflation drift is low probability.

[Mega]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Ej/Fred:-
http://www.guardian.co.uk/business/2...-foreign-goods
Mike

[Supercilious]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Hmmm.... Nobody wants to touch the subject of disinflation any more. I guess that leaves just me and metalman as defenders of the disinflation cause.

[cjppjc]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Hmmm.... Nobody wants to touch the subject of disinflation any more. I guess that leaves just me and metalman as defenders of the disinflation cause.

I'm sticking with biflation:cool:

[markoboston]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

how does this timing reconcile with the prediction of 20% u3 unemployment?

Even with 20% U3 in the US, unemployment seems to have troughed at much lower levels in China, India, Brazil, and other relatively fast-growing economies. As demand picks up elsewhere in the world (and perhaps stabilizes in the US with massive government stimulus), with supply constrained, prices for consumables will rise.

[Guest]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Whatever that means.

I'm sticking with biflation:cool:

[cjppjc]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Whatever that means.

Alright already. UGH. Biflation look it up. I think it's in our future.

[jtabeb]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Alright already. UGH. Biflation look it up. I think it's in our future.

Yes (don't worry, third post is the charm), Yes, and Yes

[cjppjc]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Yes (don't worry, third post is the charm), Yes, and Yes

Thanks. Lukester has a hard on for me right about now.
Btw, just got my first silver maples. Very nice. I now have the complete North American set. The Libertads look the best I think.

[metalman]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Hmmm.... Nobody wants to touch the subject of disinflation any more. I guess that leaves just me and metalman as defenders of the disinflation cause.

[metalman]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Hmmm.... Nobody wants to touch the subject of disinflation any more. I guess that leaves just me and metalman as defenders of the disinflation cause.

[jandkmeyer]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Quite the games that are played after nearly all EJ writings - like Chauncey Gardener describing his winter chores and the pundits pronouncing "There will be growth in the Spring!"

My own interpretation of EJ's/Warburton's tea leaves is "stagflation"; low capacity utilization but prices pushed upward by some combination of loose fiscal policy and a sinking dollar. But nothing too exciting. No wage inflation or new era of loose lending to really drive things. Seems like we've gone back to slow motion train wreck mode.

[Supercilious]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Yessss! I knew it!!! Metalman please confirm that the dumb blond chick in the clip is you. I have a bet to collect.
(See lukester you didn't believe me when I told you metalman must be the blond type and not the ordinary one. You owe me a 12 pack of beer)

Now on a more serious tone, can FRED or EJ confirm or not if identifying the D area as deflation (and not disinflation) is not a mistake in EJ's piece? If that is so, what have they done with my beloved disinflation. Was metalman's blood spilled in vain to defend the "its not deflation, it's disinflation" theory?

[MarkL]

Re: Everyone is wrong, again – 1981 in Reverse Part I: The Great Divide – Eric Janszen

Thank you, but the percentage change showing relative CPI change doesn't really help as I'm trying to determine whether actual significant inflation (7%-15%) will kick in quickly (ie within a year), by looking at whether it has ever historically kicked in quickly. It doesn't appear to me as if it has. Fred posted some graphs that show CPI on a monthly basis instead of an annual basis, which shows it might have jumped for a month or so, but never for long enough to really pay down my house. EJs graph on an annual basis shows CPI measured by the year and I think is a better measure of prolonged inflation... and I still don't see that inflation has ever kicked in within a year of a deflationary/disinflationary period. Almost always it takes several years...