POOM-KA, the reverse iTulip theory

[Adeptus]

... brought to you by the deflationista camp of course.

Dr. Steve Keen, who supposedly saw the 2008 financial crisis coming speaks on the Max Keiser show about why deflation is here to stay.

(Watch part 2 first)
Part 2:
Part 1:

As a layman listening to economics, this guy almost makes sense, except that history tells us massive printing always leads to massive inflation. Also he believes that the Fed can't print fast enough to cause inflation... Seriously?!

The odd part is that both (itulip and this guy) predicted the down turn, and agree on most points... except what's coming next. Funny how 1+1 doesn't always = 2

Adeptus

[doom&gloom]

Re: POOM-KA, the reverse iTulip theory

definitely worth the watch, saw it yesterday...

[ThePythonicCow]

Re: POOM-KA, the reverse iTulip theory

... brought to you by the deflationista camp of course.

Dr. Steve Keen, who supposedly saw the 2008 financial crisis coming speaks on the Max Keiser show about why deflation is here to stay.

Well, my current (for at least the last six minutes now) view is that both EJ and Keen are wrong ... well half right.

I think Keen is half right in that for the time being, private debt collapse is still overwhelming public debt-money creation (except in a few areas such as the stocks of Citi, BAC, WF, JPMorgan, Fannie and Freddie). I'm in the (overloaded bandwagon) of people expecting another deflationary body slam to the economy fairly soon.

I think EJ is half right that eventually, after the private debt destruction has taken down another major chunk of FIRE debt, including the cannibilization of another big bank or two by the remaining big banks, then we get to the full fledged POOM inflation, dominated by public debt-money creation.


(right over this way metalman )

[audrey_girl]

Re: POOM-KA, the reverse iTulip theory

fyi:

interesting very recent inflation vs. deflation debate by Puplava at fsn:

http://www.financialsense.com/fsn/main.html

mish vs. Dan Amerano

'bout an hour long

Eric's is mentioned very briefly

click page, look to right of web page: third hour - first link

[goadam1]

Re: POOM-KA, the reverse iTulip theory

Well, my current (for at least the last six minutes now) view is that both EJ and Keen are wrong ... well half right.

I think Keen is half right in that for the time being, private debt collapse is still overwhelming public debt-money creation (except in a few areas such as the stocks of Citi, BAC, WF, JPMorgan, Fannie and Freddie). I'm in the (overloaded bandwagon) of people expecting another deflationary body slam to the economy fairly soon.

I think EJ is half right that eventually, after the private debt destruction has taken down another major chunk of FIRE debt, including the cannibilization of another big bank or two by the remaining big banks, then we get to the full fledged POOM inflation, dominated by public debt-money creation.


(right over this way metalman )

It's funny how there is an orthodoxy within the contrarian community. i guess if you are going to be bold in your predictions you need to stick with them. Reality has has a funny way of not meeting people's predictive timelines.

[goadam1]

Re: POOM-KA, the reverse iTulip theory

... brought to you by the deflationista camp of course.

Dr. Steve Keen, who supposedly saw the 2008 financial crisis coming speaks on the Max Keiser show about why deflation is here to stay.

(Watch part 2 first)
Part 2:
Part 1:

As a layman listening to economics, this guy almost makes sense, except that history tells us massive printing always leads to massive inflation. Also he believes that the Fed can't print fast enough to cause inflation... Seriously?!

The odd part is that both (itulip and this guy) predicted the down turn, and agree on most points... except what's coming next. Funny how 1+1 doesn't always = 2

Adeptus

No no no.

Keen is just as linear about debt pay off as bankers and mainstream economist are about talking about consumers. As an aggregate people will try to pay off debt? Maybe. More likely people will have maxed out credit. But very few people are sitting down now and saying, "wow, gotta payoff debt."

He and EJ see eye to eye on double entry bookkeeping and debt as money. But the paths to money creation and devaluation are many. Besides, hot money is running all over fire assets like mad right now. That money is getting frothy.

Besides, it's not debt load that breaks things in the end, it's your credit running out. And for debtors the end isn't deflation (stuff gets cheaper) it's inflation because the productive/credit people can still buy stuff with their worthwhile currency.

[MarkL]

Re: POOM-KA, the reverse iTulip theory

...eventually, after the private debt destruction has taken down another major chunk of FIRE debt, including the cannibilization of another big bank or two by the remaining big banks, then we get to the full fledged POOM inflation, dominated by public debt-money creation.

I'm with you here Cow. I've been calling it Ka....ka....Poom.

The root problems that caused last year's run at deflation haven't been solved. Most of the $60T in CDSs are still floating around. Citi, BofA and even Wells aren't profitable by any historical evaluation, and the housing market still has a bunch of adjustables due to kick in. Commercial Real Estate is still a shoe to drop.

On top of this, the Fed has taken their foot off of the quantitative easing accelerator and the current political mood isn't bailout/printing favorable.

I think we have another deflationary "Ka" to drop too. When it hits, the political winds will shift, the Fed will hit the accelerator even harder than it did last time, and Poom will follow.

[sunskyfan]

Re: POOM-KA, the reverse iTulip theory

That guy nails it! I couldn't agree more.

[Mashuri]

Re: POOM-KA, the reverse iTulip theory

Count me as a near-term deflationist too. I know iTulipers like to knock Bob Prechter and his perma-bear stance but, once his oft-predicted "big turn" in credit finally happened, his analysis since has been very accurate, including his call for a significant bear market rally a couple weeks before it happened. I try not to get emotionally attached to any expert or system as Mr Market has a habit of humbling the best. I just read as much as I can, make up my mind and constantly reevaluate.

[thousandmilemargin]

Re: POOM-KA, the reverse iTulip theory

I'm with you here Cow. I've been calling it Ka....ka....Poom.

.....
I think we have another deflationary "Ka" to drop too. When it hits, the political winds will shift, the Fed will hit the accelerator even harder than it did last time, and Poom will follow.

At the risk of sounding silly, I'd go for ka-poo-ka-POOM.
Currently we seem to be approaching the end of the poo phase. A rehersal for the big POOM that lies on the other side of the next leg down.

With the US dollar now being used as a funding currency for carry trade speculation, I'd expect a swing down in the stock market to lead to another strengthening of the $US as leverage is unwound ( a repeat of the action last year).

If we then make a new stock market low early next year there will probably be enough panic to justify dramatic monetarization, and POOM will be on.

Obviously it is possible that new lows in the stockmarket would be accompanied by a further weakening in the dollar, but it seems more likely to me that another leg down means another "flight to safety", another round of deleveraging.

[swannmex]

Re: POOM-KA, the reverse iTulip theory

My only question is, "if it is ka-ka-poom or some variation on that theme, does gold look out 6 months to the inevitable POOM and just continue higher"?? I sort of assumed gold would be the flight to safety play when the market crashed the last fall. That is obviously not what happened. If we have another deflation scare ( ka-ka ) my guess is that this time we will not see the forced liquidation and margin call selling in gold and gold shares that we saw last fall. This time the inevitable POOM will be so obvious that gold will be the only real flight to safety play ( the only lifeboat ) and will be recognized as such. It is going to be a very interesting next 6 months.
Good luck to all of us.

[Kadriana]

Re: POOM-KA, the reverse iTulip theory

I'm with you here Cow. I've been calling it Ka....ka....Poom.

The root problems that caused last year's run at deflation haven't been solved. Most of the $60T in CDSs are still floating around. Citi, BofA and even Wells aren't profitable by any historical evaluation, and the housing market still has a bunch of adjustables due to kick in. Commercial Real Estate is still a shoe to drop.

On top of this, the Fed has taken their foot off of the quantitative easing accelerator and the current political mood isn't bailout/printing favorable.

I think we have another deflationary "Ka" to drop too. When it hits, the political winds will shift, the Fed will hit the accelerator even harder than it did last time, and Poom will follow.

I vote for Ka Pa Poom. I think we're going to see biflation/stagflation phase which I think we're already in. You're seeing food prices go up but restaurant prices going down. Copper go up but housing prices go down. I think people are going to be spending more on the basics so they will be able to afford less of the luxuries. I think it's hard to get a deflationary spiral like the Great Depression. Back then, people just retreated to their farms, grew their own food and didn't drive anywhere. A lot didn't have electricity or took their kids to the doctor every 3 months for well checks. I know even in Boston, my great grandfather had chickens and had a size able garden. People are more dependant now so I don't think staples will drop in price like they did in the early 30's.

[jpatter666]

Re: POOM-KA, the reverse iTulip theory

(right over this way metalman )

Back in one minute after getting towels to wipe up spewed coffee..... :p

Great picture and line! Wonder if metalman is looking for a grilled steak picture...... ;)

[sunskyfan]

Re: POOM-KA, the reverse iTulip theory

Okay ... since we are having fun .... I vote for ka plop. Tolerance for moral hazard in the internet age is much lower than in the past. The gaping moral hazard wound caused by last years bailouts and other actions is gangrenous and starting to smell. A world full-stop could be on its way. Perhaps at the point the Alien Central Bank will start loaning money .

[WildspitzE]

Re: POOM-KA, the reverse iTulip theory

I think that such scenario, ie a full stop, is simply known as Ka-Ka.