Mish Misses It

[deflateIT]

The problem with listening to mainstay economic blogger “Mike Mish Shedlock” make his deflation argument isn’t that he doesn’t know what he’s talking about — it’s that you don’t. You don’t, that is, unless you know what he means by inflation/deflation. To most of us “Joe six packs” — the kind you drink — inflation means a six pack costs more and deflation means it costs less, we don’t care why. But smart guys speak of it as a monetary event i.e. it’s an increase in the amount of money in the economy...

http://bankimplode.com/blog/2009/06/10/mish-misses-it/

[Adeptus]

Re: Mish Misses It

I find this to be a great article for us newbies that also glance at Mish once in a while. Thanks for sharing. Cleared up some of my confusion on what different people mean by "inflation".

[c1ue]

Re: Mish Misses It

I'd like to point out that the article actually says Mish is right - just not quite completely right.

The opposite of damning with faint praise is praising with faint criticism.

But the faint criticism fails to address the specific problem with Mish's talk: how can deflation and high gold prices correlate?

Secondly the article talks about specific things which have been debunked such as that Japan printed lots of money yet still had deflation.

All in all a poor article which mostly just borrows from elsewhere. I also see uncritical adoption of themes such as ECB bailing out Deutsche Bank on its COMEX gold contracts. Interesting idea but zero proof thus far - correlation is not causation.

I like Jim Willy and read him regularly but hardly treat everything he says as being true. For one thing - why would Deutsche Bank be the first 'hitmen' target for COMEX when there are numerous other targets in the US? Isn't Germany one of Jim Willy's axis of new currency (others being China and Russia).

Not very self consistent, but absolutely entertaining.

[thedanimal]

Re: Mish Misses It

I'd like to point out that the article actually says Mish is right.

The opposite of damning with faint praise is praising with faint condemnaton.

Thanks for pointing out what I was about to.

The Bank Implode A Meter obviously misses it as well.

[mickeyc21]

Re: Mish Misses It

That article is fairly worthless. The writer seems to be trying to understand the subject as he writes about it.

The real problem with Mish's pedantic deflation/inflation argument is that he sees no connection between deflation/inflation and price levels. He correctly asserts that available money AND credit need to be looked at to see if deflation is occurring. He then makes the incredible mistake of not connecting the available amount of money (from any source) to the available amount of goods and services.

This is the point that trips up almost everyone looking for a formulaic definition. If there is one apple in the economy and one dollar the apple is worth one dollar. If a second dollar is created the apple is now worth two dollars. However if there are two apples and two dollars the apple is still worth a dollar and we have no problem. Mish does not understand this - he will call you stupid if you press him on it.

The ONLY way to correctly call deflation or inflation is therefore price levels. This is very tricky to do, especially when you are in the middle of an event. If deflation or inflation don't influence price levels then obviously the event exists only in the mind of the writer.

Mish also has the caveat that "I reserve the right to change my mind at any time" written into any article like this. This is cowardly. If he is making a "best guess" argument it should be labelled as such. Instead all his writing is done in a "Word of God" tone which gets very tiring.

[metalman]

Re: Mish Misses It

That article is fairly worthless. The writer seems to be trying to understand the subject as he writes about it.

all of mish's articles read that way.

The real problem with Mish's pedantic deflation/inflation argument is that he sees no connection between deflation/inflation and price levels. He correctly asserts that available money AND credit need to be looked at to see if deflation is occurring. He then makes the incredible mistake of not connecting the available amount of money (from any source) to the available amount of goods and services.

This is the point that trips up almost everyone looking for a formulaic definition. If there is one apple in the economy and one dollar the apple is worth one dollar. If a second dollar is created the apple is now worth two dollars. However if there are two apples and two dollars the apple is still worth a dollar and we have no problem. Mish does not understand this - he will call you stupid if you press him on it.

The ONLY way to correctly call deflation or inflation is therefore price levels. This is very tricky to do, especially when you are in the middle of an event. If deflation or inflation don't influence price levels then obviously the event exists only in the mind of the writer.

all mish has to do it read about.com's simple and serviceable take on inflation:

Inflation and the Money Supply

We can also have inflation and deflation by changing the amount of money in the system. If the government decides to print a lot of money, then dollars will become plentiful relative to oranges, just as in our drought situation. Thus inflation is caused by the amount of dollars rising relative to the amount of oranges (goods and services), and deflation is caused by the amount of dollars falling relative to the amount of oranges. Thus, as shown by the article "Why Does Money Have Value?", inflation is caused by a combination of four factors:

1. The supply of money goes up.
2. The supply of other goods goes down.
3. Demand for money goes down.
4. Demand for other goods goes up.

maybe he can't get his head around 4 variables? how about 4 variables in a multi-step process?

Ka-Poom Theory deflation-inflation two-step: Too complex for deflationsts to grasp?

Mish also has the caveat that "I reserve the right to change my mind at any time" written into any article like this. This is cowardly. If he is making a "best guess" argument it should be labelled as such. Instead all his writing is done in a "Word of God" tone which gets very tiring.

believe it or not, many folks like that and don't care about consistency. sprinkle in a few 'gold is money' and 'all gov't sucks' phrases and his readers are happy.

[FRED]

Re: Mish Misses It

Whatever you do, don't show Mish the yield curve over the past 50 days.

[Jay]

Re: Mish Misses It

Whatever you do, don't show Mish the yield curve over the past 50 days.

When does he throw in the towel? Verticality?

[jimmygu3]

Re: Mish Misses It

When does he throw in the towel? Verticality?

Doubtful. At that point housing will be even further in the crapper (Deflation!) and gold will be through the roof (I told you gold was good to hold in a deflation!). :p

Jimmy

[nero3]

Re: Mish Misses It

I think Mish have a depressive personality, anyhow, it's typical how things again turn, when people feel confident enough to criticize him.