Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

[Sharky]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Although I'm in the iTulip camp with regard to Ka-Poom, there is another argument for hyperinflation that wasn't mentioned in the OP:

Rather than being completely driven by the creation of new money and credit, another scenario starts with overseas investors losing faith in the dollar. As a result, they look for a good way to exchange their dollar holdings for other assets. The largest supply of dollar-denominated assets is in the US, so the dollars come flooding home. When they arrive, asset prices are driven up, and the value of the dollar declines. At some point, the process becomes self-reinforcing: rising asset prices and a declining dollar encourages the selling of dollars and the purchase of assets; the velocity of money will increase.

What's different about this scenario is that the tools the Fed has available to it will do relatively little to slow it down, because it's not credit-driven.

[FRED]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Although I'm in the iTulip camp with regard to Ka-Poom, there is another argument for hyperinflation that wasn't mentioned in the OP:

Rather than being completely driven by the creation of new money and credit, another scenario starts with overseas investors losing faith in the dollar. As a result, they look for a good way to exchange their dollar holdings for other assets. The largest supply of dollar-denominated assets is in the US, so the dollars come flooding home. When they arrive, asset prices are driven up, and the value of the dollar declines. At some point, the process becomes self-reinforcing: rising asset prices and a declining dollar encourages the selling of dollars and the purchase of assets; the velocity of money will increase.

What's different about this scenario is that the tools the Fed has available to it will do relatively little to slow it down, because it's not credit-driven.

That is correct. That is part of the process. Please see the now frequently copied Ka-Poom Theory circa 1999.

[Kurt Horner]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Note that the period of the "Ka" disinflation begins toward the end of 2008. Mind you, this chart was created in March 2006.

And it's already inaccurate. Even using Shadowstats CPI, we never even got close to the 2008 peak CPI of 14% shown on this chart (Shadowstats gives 9%). Your timing is right, but the values are off.

Note also that the period of disinflation lasts well into 2010.

Meaning that nothing short of obvious deflation will resolve this question before then, since the deflation types are predicting a similar time frame for the market bottom.

So, I guess the question is, at what point is Ka-Poom theory disproven? A generous benchmark would be if Shadowstats shows negative CPI for a six-month period then deflation becomes hard to dispute. (At present, they show 3.5% year-over-year but the rate is dropping like a stone.)

Ka-Poom Theory says a brief period of actual deflation is possible, as occurred in 2001 and is occurring now.

Is six months long enough to no longer be considered a "brief" deflation? Or should we use a peak deflation value (i.e. CPI below -5%)?

This is important, since if you wish to have a predictive theory, then the theory should also be falsifiable.

[Chris Coles]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

If the system is predicting deflation and the reality becomes inflation then, as the change occurs and inflation starts they will be completely blindsided and will refuse to recognise the symptoms. Classic Mandarin mindset will overcome their perceptions. The more I have listened to the debate the more I have come to believe that regardless of what does happen, the system will be unable to respond. That it will lock up solid.

We often see this in a science fiction movie where the computer is asked an impossible question and because it tries to answer but cannot, it blows up. I suspect we are about to see the same effect, but this time for real. Faced with the unacceptable impossibility that they were after all wrong, they will not be able to change direction.

A good example has just turned up courtesy of Huffington Post

The widespread contrition permeating Davos is matched by an unnerving feeling of paralysis. The people here -- and we are talking about some of the most influential people on the planet -- seem confused, at a loss about how to attack the financial crisis. No one seems to think that the steps being taken are sufficient. It's as if we are watching things unravel -- how many times, for example, are we gong to hear that layoffs have exceeded expectations? -- but are powerless to stop the unraveling.

http://www.huffingtonpost.com/ariann..._b_162290.html

[bart]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

And it's already inaccurate. Even using Shadowstats CPI, we never even got close to the 2008 peak CPI of 14% shown on this chart (Shadowstats gives 9%). Your timing is right, but the values are off.

You're inaccurate, and also seem to like cherry picking... and are completely ignoring that the full SGS CPI peaked at around 13.6% in 2008.

If you don't care for Ka-Poom theory and apparently have so much attention on disproving it, why are you even here?

[FRED]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

You're inaccurate, and also seem to like cherry picking... and are completely ignoring that the full SGS CPI peaked at around 13.6% in 2008.

If you don't care for Ka-Poom theory and apparently have so much attention on disproving it, why are you even here?

Between managing the 100+ applicants to join iTulip every day and filtering out spammers, at this rate we're going to have to hire a full time troll chaser.

[bart]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Between managing the 100+ applicants to join iTulip every day and filtering out spammers, at this rate we're going to have to hire a full time troll chaser.

Maybe you could start a volunteer official iTulip troll chaser group... :eek: :rolleyes: ;)

They sure are coming out of the woodwork, and its a sure indicator that iTulip's impact is growing greatly, and its approach, accuracy & relative sanity is getting the attention it deserves.
Fundamentals like a class act are always a winner.

[Spartacus]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

if I understand correctly the chart is NOT the theory. It's not even the direct prediction of the theory - the chart is at 2 arms lengths from the theory.

The theory is some pragmatic combination of the theories and observations of Hudson, Mayer, Warburton, Galbraith, Keen, Bernanke and others.

the FED and political actions are the direct prediction.

The chart is, again, twice removed from the theory.

[Spartacus]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Between managing the 100+ applicants to join iTulip every day and filtering out spammers, at this rate we're going to have to hire a full time troll chaser.

Get some slave labour (sometimes called "interns", and other times "grad students")

(speaking from personal knowledge, having been one)

[FRED]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

if I understand correctly the chart is NOT the theory. It's not even the direct prediction of the theory - the chart is at 2 arms lengths from the theory.

The theory is some pragmatic combination of the theories and observations of Hudson, Mayer, Warburton, Galbraith, Keen, Bernanke and others.

the FED and political actions are the direct prediction.

The chart is, again, twice removed from the theory.

Ka-Poom Theory, the theory behind the chart, predates Hudson, Keen, and Bernanke, by many years, while Warburton and Mayer were inputs, as were Garret Garrett and a hundred others.

The chart expresses likely changes in inflation and interest rates if the theory holds true. Note that the original chart from Nov. 1999 was wrong: we did not anticipate the securitized debt market and the various bubbles it spawned, and stated that on our About page when we re-opened in March 2006. The second chart is a phase shift of the first, published in April 2006. Barring the development of a new bubble, which seems highly unlikely, no further phase shifts will be needed and the chart stands as is.

The primary value of such a theory is to compare actual events against the model. The variances from the model are more instructive than the agreements.

[Guest]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Bart - with respect, I can't say I agree with this approach as were everyone to adopt and practice this viewpoint (those who disagree are "trolls") this community would rapidly "evolve" towards ever greater homogeneity of thinking. I notice Fred does not qualify your assertion, indicating he'd also like to see less disagreement or challenge to "the thesis". I greatly appreciate iTulip but the day you guys begin to tighten this intolerance of "trolls" to the point you are booting posters such as Kurt above for the altogether pointed and rational question he asked, I'll just wander off with them in sympathy. Metalman's constant barking in response to such "deviant" opinions represents the syndrom run amok. Don't like "all think alike" clubs. And your and Fred's definitions of "trolls" are acutely vulnerable to an invisible threshold question: when do such objections merely become a circling of the wagons?

You're inaccurate, and also seem to like cherry picking... and are completely ignoring that the full SGS CPI peaked at around 13.6% in 2008.

If you don't care for Ka-Poom theory and apparently have so much attention on disproving it, why are you even here?

[Kurt Horner]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

You're inaccurate, and also seem to like cherry picking... and are completely ignoring that the full SGS CPI peaked at around 13.6% in 2008.

Oops, you're right. I read the "pre-Clinton CPI" from the main page, rather than the SGS CPI from their charts page. Fair enough, the theory could still hold -- and I should point out that I never said it couldn't still hold, just that it might not.

If you don't care for Ka-Poom theory and apparently have so much attention on disproving it, why are you even here?

As you can see above, I can be reasonable. I think Ka-Poom makes plenty of sense, right up until the point where it the credit system breaks entirely. It's an open question whether another cycle can be initiated, and I think its worthwhile to ask at what point the theory will be falsified. Otherwise you're just being dogmatic.

[bart]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Bart - with respect, I can't say I agree with this approach as were everyone to adopt and practice this viewpoint (those who disagree are "trolls") this community would rapidly "evolve" towards ever greater homogeneity of thinking. I notice Fred does not qualify your assertion, indicating he'd also like to see less disagreement or challenge to "the thesis". I greatly appreciate iTulip but the day you guys begin to tighten this intolerance of "trolls" to the point you are booting posters such as Kurt above for the altogether pointed and rational question he asked, I'll just wander off with them in sympathy. Metalman's constant barking in response to such "deviant" opinions represents the syndrom run amok. Don't like "all think alike" clubs. And your and Fred's definitions of "trolls" are acutely vulnerable to an invisible threshold question: when do such objections merely become a circling of the wagons?

Opinions vary Lukester, but when someone starts posting with partial data and gets their facts wrong and merely makes assertions, then they deserve to be challenged at the very least.

Trolls do exist, whether you admit to it or take it into account or not. Whether that poster is one or not remains to be determined in my opinion, but I will always challenge incorrect facts or shoddy thinking or assertions or logical fallacies or similar when I see them.

And excessively emotional and "high horse" comments like your "I'll just wander off with them in sympathy" don't work in your favor.

[metalman]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Oops, you're right. I read the "pre-Clinton CPI" from the main page, rather than the SGS CPI from their charts page. Fair enough, the theory could still hold -- and I should point out that I never said it couldn't still hold, just that it might not.

As you can see above, I can be reasonable. I think Ka-Poom makes plenty of sense, right up until the point where it the credit system breaks entirely. It's an open question whether another cycle can be initiated, and I think its worthwhile to ask at what point the theory will be falsified. Otherwise you're just being dogmatic.

'all models are wrong, but some are useful' is the credo here. ka-poom has been very useful for ten years... kept me in gold, not trading it. check it...



you don't need a credit system to have mega inflation. eg. argentina... virtually no credit in the economy and double digit inflation. ka-poom theory accounts for that, too... a declining currency from repatriated dollars fuels the inflation.

[bart]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Oops, you're right. I read the "pre-Clinton CPI" from the main page, rather than the SGS CPI from their charts page. Fair enough, the theory could still hold -- and I should point out that I never said it couldn't still hold, just that it might not.

As you can see above, I can be reasonable. I think Ka-Poom makes plenty of sense, right up until the point where it the credit system breaks entirely. It's an open question whether another cycle can be initiated, and I think its worthwhile to ask at what point the theory will be falsified. Otherwise you're just being dogmatic.

Fair enough - mistakes do happen.

I have no problem with asking about a theory or whatever, or talking about it being falsifiable but Ka-Poom in my book is not about calling turns perfectly, but rather about a broad framework within which to judge events. The Ka-Poom chart has been noted on multiple occasions as not being intended for timing even though its accuracy has been pretty decent.

Ka-Poom also aligns well (or vice versa) with my own original work on a hard vs. paper asset cycle which is basically inflation driven, and goes back over 200 years. You'll notice that the down periods during a hard asset cyle last longer than a "brief" period of deflation and I submit that the Ka period also includes disinflation or stagflation if you prefer.