1970's inflation coming?

[Mega]

Everyone is talking (selling) deflation, but others are begining to question:-
http://www.telegraph.co.uk/finance/c...f-the-70s.html

As a child i watched a FIRESTORM of inflation RIP across UK, strike after strike as workers tried to despritly keep up...."They" suscessfully told the lie that it was ALL the fault of Unions demaning inflation matching wages...........

This time there are no unions & no factory production to worry about.......
Mike

[Mega]

Re: 1970's inflation coming?

Well they stoking the fire with "QE":-
http://www.telegraph.co.uk/finance/c...roductive.html

I wonder if we see a SUDDEN turn from deflation to inflation?
Mike

[Starving Steve]

Re: 1970's inflation coming?

Unlike the 1970s, this current malaise is more deflationary than inflationary:

a.) Home prices are eroding, slowly and painfully but steadily. The banks won't lend: First, second, turd mortgages and creative finance are of no interest to bankers anymore .... Like, "There's the door-man." ... Meanwhile, the carrying-costs for homes are rising, like taxes and utilities and up-keep. This just clobbers the value of homes and especially clobbers the value of the larger high-priced homes. And as the luxury homes sink to pennies above the value of low-end homes, the low-end homes sink. And as the low-end homes sink and become more affordable, the utility of renting apartments diminishes. This puts pressure on the market value of apartment blocks and rental homes...... It's lovely, thank you Bernanke. Well done!

b.) The high-paying jobs are disappearing. Who needs high-priced consultants and planners when computers can provide information about anything, instantly, and to everyone? The task to-day is to determine what you want to know about, rather than to hire a high-priced professional to tell you the answers.... This generates a slight de-flationary tide in the job market.

c.) Stocks are doing nothing but going down, slowly and painfully and steadily. Dividends are toooooooooo low to compensate for the decline of the value of the principle in stock investments....... No more stock market millionaires, at least not to-day.

d.) Interest rates are ZERO. Money doesn't go to money. Instead, money just sits and collects dust, if you're lucky.

e.) The velocity of money is near zero, so whatever money is printed just sits and collects dust. This has a slight de-flationary affect upon prices, because money is "tight" and people are scared to spend money.

f.) The Sun is rising upon China. Places like Silicon Valley are going to have just a bit of competition in future. Wages for electrical-engineers are going to decline.

g.) What is the future for places like America and Britain, especially after tens-of-billions of dollars/pounds have been wasted upon ridiculous alternative energy schemes like corn-ethanol, windmills, solar panels, tidal-energy projects, and so-called "environmental protection" schemes? Nations adrift and without a future tend to have falling wages and unemployment....... Hungry people tend not to care as much about issues of "sustainability", "carbon foot-prints", "bio-diversity", so-called "global warming", "climate change" and such. "Keep Lake Tahoe Blue," won't be quite as important when people are hungry.

h.) Whatever you can do, a robot ( or computer ) can do better. This tends to de-value your worth. As your pay-cheque diminishes, you lose your house, then your wife, and then your kids.

i.) At 2.85% for mortgage money, why would a bank lend? This tends to re-enforce the deflationary under-tow in the economy. ......... Thank you, Dr. Bernanke.

j.) As investments in America/Britain become useless and hopeless, capital flees to other nations where people have done their homework. How long did China tolerate Greenpeace and the Sierra Club? Nations with money fleeing tend to be nations which are short on cash. This tends to have a slight de-flationary affect.

k.) As living conditions become impossible, people have a slight tendancy to live with each other, if for no other reason than to share household expenses. This re-coupling of households tends to diminish the demand for new homes and new apartments. This re-coupling de-flates the value of real estate, not just for new construction but for all construction, both new and old.

l.) As homes become a terrible investment ( opposite to what they were during the 1970s ) the demand for homes and home-improvement declines. This tends to put trades-people out of work. The warehouses, yards and stores, suppying the construction industry close-up, or go bankrupt and close-up. This has a slight de-flationary affect upon the economy. Skilled trades-people become, skilled trades-people sitting at home, watching television.

*Understood, this de-flationary spiral encourages central banks to accelerate their printing of paper-money. Governments are also encouraged to create jobs with additional deficit spending. ( Keynsian economics )

** Currently, as I write this blog, home prices around Silicon Valley are declining at the rate of 5.8% per month, for homes in the $500,000 price bracket, give or take $100,000. Very lovely! .... Thank you, Ben Bernanke.