Why EJ trumps Faber et al

[rjwjr]

Here is an excellent example of why EJ is so much better than Faber and the others.

"Buy Stocks Because U.S. Dollars Will Be "Worthless," Says Faber http://finance.yahoo.com/tech-ticker...8&asset=&ccode=

Their message may be similar to EJ and iTulip, but...

...there is so much other "noise" in their message that the primary points are diluted,
...they make stupid individual stock recommendations that serve to cheapen their primary message and themselves,
...they are media whores who dilute their primary message via overexposure and/or creating "insights" and ideas for the sole purpose of getting more TV time.

EJ is a class act and iTulip is a beacon amidst the fog.

Thanks, iTulip gang, for your efforts and guidance.

[metalman]

Re: Why EJ trumps Faber et al

Here is an excellent example of why EJ is so much better than Faber and the others.

"Buy Stocks Because U.S. Dollars Will Be "Worthless," Says Faber http://finance.yahoo.com/tech-ticker...8&asset=&ccode=

Their message may be similar to EJ and iTulip, but...

...there is so much other "noise" in their message that the primary points are diluted,
...they make stupid individual stock recommendations that serve to cheapen their primary message and themselves,
...they are media whores who dilute their primary message via overexposure and/or creating "insights" and ideas for the sole purpose of getting more TV time.

EJ is a class act and iTulip is a beacon amidst the fog.

Thanks, iTulip gang, for your efforts and guidance.

randomly ran across this gem from jun 2008...

Re: Deflation vs Inflation debate: Part IVXXX - Final

---

Quote:

Originally Posted by phirang It is this that bernanke is banking on... the commodity productivity "shocks" will slow down consumption to the point where inflation converges to an upper-bound. Inflation is a global problem: the real question is, will wages continue to rise to meet the new price demand?

This is essentially correct. The debt deflation risks of collapsing property bubbles were well known to the Fed years ago. The Fed has since 2002 issued several papers on the topic. In 2006 we borrowed a few charts from one of them, such as the chart below.

As the credit bubble unwinds, the primary mission of the Bernanke Fed is to do whatever is necessary to prevent a zero bound event as occurred in Japan in the 1990s and in the US in the 1930s.



Readers may wonder how the spike of inflation in 1933 was accomplished if money is lent into existence and the banking system was barely functioning after thousands of bank failures and bank runs. Where did the spike in the money supply come from to produce this immense inflation? I've asked various folks in the deflationist camp for an explanation but have never gotten one.

Anyone worried about deflation needs to ask, How is the value of fiat dollars maintained?



Periods of deflation in the US were common between 1801 and 1933 when the US was on a gold standard, two minor periods of deflation occurred after 1933 after the US went off the gold standard, and deflation has never occurred since the US unilaterally ended the international gold standard in 1971. In a world of fiat currencies, what exactly are currencies going to inflate against to create deflation?

By fixating on the US and on the Fed, those who expect deflation are missing the key development in the larger picture today, the growth of global inflation since 2004. The global economy was still US-centric in the 1970s. One way to see the importance of the global inflation picture is to compare the current period to the 1970s.

Inflation, Fed policy, oil, and the dollar: Five Periods, A through D

A: Spike in oil imports and oil prices, loose monetary policy, inflation surge, dollar low, economic growth
B: Final top in oil imports, extremely tight monetary policy, inflation peak, recession, followed by dollar recovery
C: Bottom in oil imports, leveling off of inflation as Fed ends loose policy following recession and begins to tighten, dollar continues to strengthen
D: OPEC oil imports back to 1970s levels with non-OPEC volumes to match (not shown), rising oil prices, loose monetary policy, inflation surge, dollar low, economic growth

Our current Period D is in many ways similar to the late 1970s Period A. It appears to be clear what the Fed needs to do: halt the source of the inflation surge by raising interest rates. However, the world is constantly changing. No two periods are alike.

The antecedents for this crisis are the collapsing housing bubble and Peak Cheap Oil that is fueling, if you'll excuse the pun, global inflation. The Fed's actions to manage the US debt deflation are exacerbating that problem. Further, in our less US-centric more multilateral economic world, the Fed cannot end the US dollar and inflation crisis by acting unilaterally by raising short term rates drastically as it did in the late 1970s. Not only is the US at the beginning of a long debt deflation cycle and in danger of turning the credit crunch into a full blown banking and credit crisis, but the negative impact of drastic rate hikes on US trade partners' economies, which were politically acceptable in the US-centric world as existed in the late 1970s, are a non-starter today.

For example, the devastating impact the late 1970s Fed rate hikes had on the Soviet economy was consistent with foreign policy objectives that were accepted by most US allies. The negative impact on Russia of drastic monetary policy actions by the Fed today may be viewed by Russian leadership as hostile, potentially creating a grave political or even military crisis between the US and Russia. The Fed must move carefully. This can be noted in the step function character of the Fed Funds data depicted on the graph: no massive one point rate cuts but rather small increments surrounded by carefully crafted wording.

Another other error deflationists make, besides denying the existence of inflation today, is to presume that just because long term interest rates are low, inflation must be low, too. The historical data do not bear this out.

Where is inflation going? Inflation expectations are a reasonably good leading indicator of future inflation. The data continue to point up. No doubt this has the Fed worried.

A final point, deflation in Japan is often thought of as continuous since the 1990s. The chart below shows a more complicated picture. Our periods of inflation and disinflation – falling rate of inflation vs negative rate of inflation or deflation – will be equally variable albeit with an inflationary bias.

ps... whenever you see a chart from ej with a question mark ? on it, trade it. eg oil 'cycle peak?' june 2008 above and dollar below...

[D-Mack]

Re: Why EJ trumps Faber et al

He sounds optimistic with 2018

[gugion]

Re: Why EJ trumps Faber et al

randomly ran across this gem from jun 2008...
ps... whenever you see a chart from ej with a question mark ? on it, trade it. eg oil 'cycle peak?' june 2008 above and dollar below...

According to the below link, inflation expectations are now pointing downwards again, what does this mean?

http://research.stlouisfed.org/fred2...d=,&ost=,&oet=,

[rjwjr]

Re: Why EJ trumps Faber et al

According to the below link, inflation expectations are now pointing downwards again, what does this mean?

http://research.stlouisfed.org/fred2...=,&ost=,&oet=,

Who is being surveyed in this survey? It looks more like a rear-view mirror (extrapolation of recent trends) perspective than a front windshield forecast.

[FRED]

Re: Why EJ trumps Faber et al

According to the below link, inflation expectations are now pointing downwards again, what does this mean?

http://research.stlouisfed.org/fred2...d=,&ost=,&oet=,

We pull out our handy automatically updating "Someone is Wrong" closeup chart to see the latest.

Both inflation expectations and bond yields say deflation. But, as is always true in "Someone is wrong" periods, rather than confirm the trend, CPI inflation with a one year lag ticks up!

Are we having fun yet?

Here's the wide angle "Someone is Wrong" chart.