The truth about deflation - Eric Janszen

[Guest]

Re: The truth about deflation

Here's another promising harbinger for US deflation going forwards (not).

TREASURY SETTLEMENT FAILURES.png

[xela]

Re: The truth about deflation

sorry, sadsack! i meant friendly-jacek.

what's to be skeptical about? a gold standard is a gov't monopoly on gold, pure and simple.

in 1934 fdr said... the dollar is no longer tied to gold for domestic banking.

but is for international transactions, and i hereby proclaim that we will pay you $35 per ounce in trade vs $20. that's 57% inflation. bang... after 3 yrs of deflation.

what's to be skeptical about?

since 2002 the dollar fell 37% against a basket of currencies. same deal, but slower.

very inflationary.

now the dollar is strengthening. guess what the fed is NOT going to do?

wait for 3 yrs of deflation.

anyone who bets the fed will is, how can i put this nicely... stupid.

What's your take, they wait for the election or until january with the new admin in place?

[c1ue]

Re: The truth about deflation

I do urge caution on that, given that there are no guarantees that the ESF hasn't taken a page out of the BoJ's yen intervention book and will reverse again this week or next.

Also do take into account on any of my posts that I'm an active momentum based trader and can inadvertently come across with what might look like an intermediate or longer range picture, when I'm actually only looking at it for short term purposes. My average trade is under two weeks long, and recently under a week.

Bart,

Understood.

I am almost your complete opposite: I operate under the grand-dads limping using a cane once a generation to trade model. Unfortunately the generations are happening much more quickly these days - 5 or 10 years instead of 30 :rolleyes:

So rather than change my game - I've switched over to starting/buying/operating businesses.

[friendly_jacek]

Re: The truth about deflation

Okay. You say what is happening now is deflation.

Yes, look up the definition of deflation, if you don't believe.

Then what would you call what happened in the early 1930's?

That is officially called a deflationary spiral, but you can call it hyperdeflation if you wish.

The history rhymes but doesn't exactly repeats. No 1929, but bouts of deflation-inflation.
Alternatively, it can be considered as deflation/inflation happening at the same time (but at various speeds) as deflation of assets and devaluation of $ value.

[friendly_jacek]

Re: The truth about deflation

Clearly you are disappointed in your recent investment choices, but try to keep an objective view on what you have seen on iTulip.

Since you asked, I will answer. I think itulip is one of the best investment sites I ever discovered. However, as my understanding of economy increases (and I was totally ignorant 1 year ago), the more problems I see with itulip approach.

Now, Itulip got a lot of call right, and some with amazing timing accuracy (the best recent example is the september crash worning). However, some of the explanations and arguments are very weak if not outright incorrect. There is also a lot of big Ego clinging to previous calls and twisting reality to confirm to expectations.

This makes me uneasy as it questions credibility and the validity of the whole Ka-Poom theory. I still believe the Ka-Poom will happen in one way or another, but we should discuss different aspects of it or timing and not just divide into inflation only camp or deflation only camp as the truth is likely somewhere in between.

Thinks Itulip could improve:
1. deflation vs disinflation: itulip should start using these economic terms in the mainstream, common sense.
2. credit destruction: itulip should recognise debt as money and credit destruction or deleveraging as deflationary forces.
3. reavaluating money inflow/outflow analysis and $ exchange rate analysis in context of previous recessions.
4. downsizing in the Ego department
5. Fred consulting with EJ before firing quick replies.

PS: Luke, be patient with the metal person, as his scull is hard due to all that metal.

[bart]

Re: The truth about deflation

Bart,

Understood.

I am almost your complete opposite: I operate under the grand-dads limping using a cane once a generation to trade model. Unfortunately the generations are happening much more quickly these days - 5 or 10 years instead of 30 :rolleyes:

So rather than change my game - I've switched over to starting/buying/operating businesses.

More power to you on your own approach. The only folk that I've seen being quite successful in investing in my life are the ones that truly define their own approach, and then let others have their own opinions too.
"Think for yourselves and let others enjoy the privilege to do so, too."
-- Voltaire

I'm over 60 and there are other factors, so starting businesses etc. isn't workable for me. Also my experiences with owning & running my own photofinishing business in the '70s and '80s left me cool at best in dealing with all the "interference".

[ThePythonicCow]

Re: The truth about deflation

they wait for the election or until january with the new admin in place?

I was under the (probably naive) impression that it was neither November nor January, but October that the Fed opened up the money spigots. Witness the reversing back to near sanity of LIBOR, the recent lowerings of the Fed Funds rates, the generous dollar swaps with other Central Banks, the willingness to finance commercial debt paper, and lordie knows what else in the way of "free" money.

Prior to October, they seemed to want to carefully funnel (sterilize) their free money to the Chosen Few bank cartel masters, keeping it out of the hands of us common folk.

However I figure it must take a few months for the newly printed money to work its way through the financial plumbing to where it has a broad affect on dollar denominated prices.

[WDCRob]

Re: The truth about deflation

For those arguing that Fred/EJ's site-specific definition of deflation is self-serving or inconsistent, ask yourself...

Do you think Mish et al are describing an event lasting a week, a month, a quarter or a year when they talk of 'deflation?' Clearly they are not.

And EJ's thesis has always been presented in juxtaposition with the 'deflationistas.' He's used their arguments as a foil for KaPoom, and engaged them directly in debate here several times. I believe those debates have always used deflation in the context of a self-reinforcing process. It's been an unstated assumption.

So while it may be semantically confusing to you (especially if you arrived only recently), it seems to me that it's also intellectually honest and that it's time to just move on already.

iTulip could have been clearer in their choice of words, but the meaning has been consistent across time.

[Charles Mackay]

Re: The truth about deflation

Exactly right!

Keen and Janszen concluded in their last iTulip discussion that letting wage inflation rip is the only viable medium term political solution to the debt deflation problem. Will the next administration be the one to do the evil dead? It's been shaping up for years.

Inflation is Dead! Long Live Inflation!

I can't see how this would be possible. GM wage rates are already at $60/hour including benefits. If you tried to increase these wages to $70 next year and $81 the next year etc.... all the money in dollars would rush for inflation hedges creating an inflationary spiral and skyrocketing interest rates and thereby defeating the whole purpose of the wage increase. I think an overnight dollar devaluation and debt jubilee is more likely because overnight every person holding dollars is instantly devalued and can't rush out for protection.

And that is the reason why this transition period isn't tradeable. It appears that you better be positioned for this to happen on any given weekend.

[Charles Mackay]

Re: The truth about deflation

For those arguing that Fred/EJ's site-specific definition of deflation is self-serving or inconsistent, ask yourself...

Do you think Mish et al are describing an event lasting a week, a month, a quarter or a year when they talk of 'deflation?' Clearly they are not.

And EJ's thesis has always been presented in juxtaposition with the 'deflationistas.' He's used their arguments as a foil for KaPoom, and engaged them directly in debate here several times. I believe those debates have always used deflation in the context of a self-reinforcing process. It's been an unstated assumption.

So while it may be semantically confusing to you (especially if you arrived only recently), it seems to me that it's also intellectually honest and that it's time to just move on already.

iTulip could have been clearer in their choice of words, but the meaning has been consistent across time.

It appears that the choice of the phrase Ka Poom is a little confusing and doesn't really represent EJ's theory very well since it's a 4 step process. I think when he annotated this graph (the 4 A's being the 30's, and the 4 B's being the current times) was the first time I understood why he wan't labeling 2000- 2002 a Ka and the (2002-2008 energy and commodity bubble) a poom. It finally became clear to me what he was trying to say!

Note the difference between A4 and B4 which represents being on the gold standard and not being on the gold standard.

EJ and Fred please advise if I'm misstating anything here.

[c1ue]

Re: The truth about deflation

1. deflation vs disinflation: itulip should start using these economic terms in the mainstream, common sense.
2. credit destruction: itulip should recognise debt as money and credit destruction or deleveraging as deflationary forces.
3. reavaluating money inflow/outflow analysis and $ exchange rate analysis in context of previous recessions.
4. downsizing in the Ego department
5. Fred consulting with EJ before firing quick replies.

F_J,

1) iTulip has a clear definition for deflation and disinflation - it is in the glossary. How can iTulip in good conscience start using these terms as the "mainstream, common sense" commentators do? You'll note those like Mish don't even define deflation except as a catch all of somethings price going down. Mish doesn't distinguish between asset deflation, commodity deflation, price deflation, etc etc. For him, going down means deflation. Even if it is for 1 millisecond, or for 1 decade. Other mainstream commentators are mostly equally vague. Vagueness is good - it means you can reinterpret later if something doesn't work out.

2) iTulip has talked at length about asset price deflation. Perhaps you should clarify what you believe is missing. Is that the recent dollar strengthening was not specifically predicted? And how is the iTulip thesis incorrect with regards to debt/money/credit etc?

3) I'm not sure where you're going with this. EJ/iTulip has clearly graphed FDI flows as an indicator of possible future behavior. FDI flows have been talked about for at least the time I've been around.

4) We are all swelled heads. We're putting all this out on the Internet!

5) Fred(s) and EJ - You can join up with Jim Nickerson and restart that horse beating. From my point of view - there are clear stylistic differences between the various Freds and EJ. For example, one of the Freds is clearly a hard core economist, while another is equally the one (or ones) doing the hard core maintenance of iTulip. But Fred ain't EJ.

[metalman]

Re: The truth about deflation

Since you asked, I will answer. I think itulip is one of the best investment sites I ever discovered. However, as my understanding of economy increases (and I was totally ignorant 1 year ago), the more problems I see with itulip approach.

Now, Itulip got a lot of call right, and some with amazing timing accuracy (the best recent example is the september crash worning). However, some of the explanations and arguments are very weak if not outright incorrect. There is also a lot of big Ego clinging to previous calls and twisting reality to confirm to expectations.

This makes me uneasy as it questions credibility and the validity of the whole Ka-Poom theory. I still believe the Ka-Poom will happen in one way or another, but we should discuss different aspects of it or timing and not just divide into inflation only camp or deflation only camp as the truth is likely somewhere in between.

itulip has a serious pearls before swine problem. there are so many sites full of ******* idiots pretending to know anything. the real solution is for itulip to go subscription only and charge $1000 a year. then it won't have to spend time explaining how to tell one of these...



from one of these...



the public spiritness is starting to bug me.

Thinks Itulip could improve:
1. deflation vs disinflation: itulip should start using these economic terms in the mainstream, common sense.

deflation to 99.99% of the population means...



...vs this...



(that's a car developed by those poor, suffering japanese during their terrible bout of 'deflation' when they took down general motors)

itulip has to continuously explain that there is deflation and there is deflation. but when you are talking to people who do not know this...



..from this...



what's the point? what that audience really wants to hear is that no matter what their...



... will go up. so all manner of stupid crap is invented to satisfy that desire, such as saying that 'deflation' will make gold go up.

if i were running itulip i'd simply tell these people to fuck off. but i guess ej is more patient than i am.

2. credit destruction: itulip should recognise debt as money and credit destruction or deleveraging as deflationary forces.

ka-poom says disinflation is inevitable after debt deflation... ah, fuckit. google 'ka-ppom theory'

3. reavaluating money inflow/outflow analysis and $ exchange rate analysis in context of previous recessions.

the idea that the usa enjoyed a group capital flow bonanza from poor countries is classic itulip... if you don't get it, that's your loss.

4. downsizing in the Ego department

this one i agree with. it's not ego, tho, but the opposite. insecurity. it's unbecoming.

5. Fred consulting with EJ before firing quick replies.

you should talk to your mother before posting here. better yet, my mother.

PS: Luke, be patient with the metal person, as his scull is hard due to all that metal.

whatever.

[Guest]

Re: The truth about deflation

Wow that is an impressive smackdown there Metalman. Moses on the mount of olives sort of material. Lissen ta him, layin' down the law. Cecil B. DeMille style declamatory. Fortunately with a "my way or the highway" approach such as yours we have others running iTulip else there'd be a very large number of think-alikes around here. Place full of Metalman clones?

"Blow me"? That is guaranteed to win over skeptical minds right there.

there are so many sites full of ******* idiots pretending to know anything. ... if i were running itulip i'd simply tell these people to fuck off. ... the idea that ... etc. ... is classic itulip... if you don't get it, that's your loss. ... you should talk to your mother before posting here. better yet, my mother. ... blow me.

[metalman]

Re: The truth about deflation

Wow that is an impressive smackdown there Metalman. Moses on the mount of olives sort of material. Lissen ta him, layin' down the law. Cecil B. DeMille style declamatory. Fortunately with a "my way or the highway" approach such as yours we have others running iTulip else there'd be a very large number of think-alikes around here. Place full of Metalman clones?

"Blow me"? That is guaranteed to win over skeptical minds right there.

my bad. will delete.

[GRG55]

Re: The truth about deflation

Yes, look up the definition of deflation, if you don't believe.



That is officially called a deflationary spiral, but you can call it hyperdeflation if you wish.

The history rhymes but doesn't exactly repeats. No 1929, but bouts of deflation-inflation.
Alternatively, it can be considered as deflation/inflation happening at the same time (but at various speeds) as deflation of assets and devaluation of $ value.

You can keep me on record as "I don't believe" :p

Compared to the 1930's this doesn't even qualify as a "rhyme".