-
-
Re: Inflation to fall to LESS than 1 % next year!!!!
Sounds nice, but I note zero mention of the possibility of the pound falling in value.
Even if oil falls in dollar terms - the net inflation effect might not be beneficial if the pound collapses. -
Re: Inflation to fall to LESS than 1 % next year!!!!
I hope the pound TANKS! Then I can buy those Audio Note Silver signatures I always wanted!Originally posted by c1ue View Post
http://www.audionote.co.uk/products/.../an-e_01.shtmlComment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
"I have a dream - I saw a printing press" (paraphrasing Ben Barnanke)
Fat chance. Look up John Exter, president of First National City Bank and founding governor of the Central Bank of Sri Lanka (oddly enough). The BIS has a eulogy on their own pages: "A central banker for all times". First, the chart which is named for him:
Then, some extracts from the eulogy:
So: do you think the US establishment is going to listen quietly with a puzzled, anguished look in their face, as deflation sucks their giant fortunes down the very small and decreasing hole that is sound money? Hmm... let me think about that for a moment.According to his own admission, the prospect for his fortune on gold dawned on him after a friendly debate he had in 1962 with his one time Harvard buddy and Nobel Laureate Paul Samuelson. In that debate on why the dollar was becoming weak and USA was losing gold, Exter gave his diagnosis which was based on his experience with the Federal Reserve System. “Paul, it is very simple. The Fed is printing too many dollars and they flow out of the country into foreign central banks who demand gold” Exter is reported to have said. But, Paul Samuelson did not accept it and wanted to explain the malady in terms of productivity differences between USA and other countries, namely, Europe and Japan....
Exter had decided then and there that the irresponsible government expenditure by the Kennedy administration could not keep the dollar stable in the long run and one day, gold would become the preferred asset by the world’s nations. Hence, he says that he converted all his savings into gold based assets and waited patiently. He was amply compensated in 1971 when the US government was forced to sever dollar’s link with gold under the gold exchange standard and allow the gold prices to be determined in the free market. Overnight, gold prices doubled from $35 per ounce to $70 per ounce. So did the gold based assets portfolio held by Exter.
He belonged to the old guard of economists who believed that economic prosperity cannot be attained by printing money. This was indeed going against the popular tides of the late 1930s and 1940s. ... At one stage, even Paul Samuelson had teased him that ‘though Exter may be right, he was lonely in his opinion’. ...
As a safeguard, a provision was included in the Monetary Law prohibiting the Central Bank to engage in trade or otherwise have a direct interest in any commercial, industrial or other undertaking. In Exter’s opinion, such interests would lead to money creation, generate conflicts of interest and prevent making investment decisions based on hard-core economic principles. As such, Central Bank’s involvement in economic activities would be sub-optimal.Comment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
i think the guys here have explained like 5000 times that inflation usually falls during recession but not always. read an article last week about a rising dollar will tamp down inflation... funny, don't recall reading the stories about how a falling dollar was creating inflation the past few years. guess it only works one way. if the point falls another 50% and you guys keep importing more oil as the north sea oil dies up... 1% inflation in your dreams. :eek:Originally posted by Mega View PostComment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
What is the Pound going to "collapse" against? The Bonar? The Euro? The Swiss Franc (which we should probably rename the Yubee, after UBS)?Originally posted by c1ue View Post
Or is it simply going to continue to depreciate against commodities/hard assets? Which hardly makes it unique...Comment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
Also related is this paper by Anastasia Nesvetailova - "PONZI FINANCE AND GLOBAL LIQUIDITY MELTDOWN: LESSONS FROM MINSKY" (pdf file)
Introduction
As the meltdown sparked by the sub-prime mortgage fiasco in the USA continues to shake the world markets, the name of one of the twentieth century greatest critics of a deregulated finance, Hyman Minsky (1919-1996) is suddenly on everyone’s lips. Observers, whether on the left or on the right, argue that we are experiencing the collapse of ‘Minskyan’ Ponzi-type financial pyramids. We certainly are. But what does this mean? And what precisely does a ‘Minskyan’ reading of finance suggest about the current state of the world financial markets? This paper shows that a Minskyan lens of analysing financial fragility brings out two critical, and intertwined, elements of the ongoing crisis: a Ponzi-type mode of pyramid financing; and a highly controversial, even deceptive, notion of liquidity. The complex inter-play between a Ponzi-type financial structures operating at the global level, and regulators’ inability to diagnose the liquidity situation accurately, cast doubt on whether, and to what effect, will policy measures aimed to deal with the current crisis, work.
Hyman Minsky and the global credit crunch
Hyman Minsky, an American economist of Russian descent, developed his theory of financial instability in the 1960s and 1970s. For a long while, Minsky’s post-Keynesian vision made him an outsider of mainstream finance theory. Only recently his analysis found resonance with mainstream economics. What is particularly worrying and unique about the financial system, Minsky famously argued, is that stability is paradoxically destabilising: ‘good times’ encourage experimentation and excessive risk-taking, ending up with a bang. This vision is particularly worrying for two reasons. First, it suggests that left to its own, the financial system is inherently unstable. Second, and that something that economists seem to have difficulties accepting, instability does not conform to a single model. The precise nature and outcome of the collapse depends on the specific characteristics of the economy in question. Since historical, political, social and institutional settings of capitalism vary greatly, it is difficult to predict the precise moment a financial crisis erupts. At the same time, Minsky argued that fundamentally, instability and fragility stem from the unstoppable process of financial innovation.
This insight into the nature of financial innovation makes Minsky’s theory pertinent to today’s world. At a time when regulators are baffled by the size of intricately packaged debts crumbling big corporations, it is clear that the state of the global credit system is primarily defined not by formal legislation and regulation, but by the continuing process of innovation of new financial products, practices and institutions. This heady ‘cocktail of innovation’ makes the task of public monitoring and control of the financial system incredibly difficult, if not outright impossible. There are at least two reasons for this. The first has to do with the very nature of financial innovation: typically, newly devised financial techniques and products add to a sense of optimism and confidence in the strength of the markets. Up until the summer of 2007, many policymakers and regulators continued to praise what they perceived as the wider risk-management facilities offered by new derivative products and in particular, the process of securitisation. Only quite recently, one official boldly declared: “a number of changes in the environment [that] point to some sustainable reduction in risk premia: more credible monetary regimes, more flexible labour and product markets…; improved instruments and markets for managing risk; better diversified portfolios.”2 A few months later, as the world markets continue to crumble and more and more big financial houses write off billions of dollars, the hidden side of this new financial environment comes into light. Optimism offered by new techniques is deceptive. While for a short while new products and techniques may help diversify companies’ portfolio and add to a sense of robustness and liquidity in the markets, in fact many of these so called new products only re-distribute, and worse, hide and multiply the risks involved. Indeed, the latest ‘hot’ product of the global spiral of financial evolution - collateralised debt obligations (CDOs) - turned out to be the pinnacles of the ongoing credit crunch.
The second reason for the confusion among policymakers and regulators dealing with the credit crunch has to do with their own policies. Financial deregulation and liberalisation, so highly praised a decade ago, turned out to be a dangerous beast, and has gone out of hand of public authorities. According to the data from the BIS, by June 2007, about 84% of all trades in financial derivatives take place in Over the Counter (OTC) markets, not on regulated exchanges.3 Unlike an organised stock exchange, in OTC markets, trading takes place on a one-to-one basis between the buyer and the seller, and prices and volumes of trades are not disclosed.4 Effectively, that means that the market is unregulated and uncontrolled. Nearly half of global lending is siphoned off through offshore financial centres, and due to the lack of transparency of these centres, we simply do not know when highly complex financial pyramids reach critical proportions. We do not know who exactly owes what and to whom in the offshore world. Moreover, while the process of securitisation has made many assets highly tradable, the ‘bundling together’ of such assets makes the task of evaluation price exposures, the nature of risks involved, as well as the very identity of borrower and lender, virtually impossible. In the global privatised credit system, as markets begin to sense speculation has gone over the top, nervousness spreads, triggering a crisis. Which is what is happening in the credit crunch of 2007-2008. And which is why the name of Minsky, who for a long while had been on the margins of mainstream finance and economics, suddenly recurs on the pages of the Financial Times, the Economist and even the IMF.
In itself, this is surprising. Hyman Minsky was a pessimist: his vision of financial capitalism emphasises inherent instability, and unpredictability, of finance, rather than optimality of free markets. And although some observers of the current meltdown believe that much like many previous episodes of instability, this is only a temporary, and benign, correction of markets values there are many reasons why Minsky’s pessimistic interpretation of events may offer a more accurate, and sobering, reading of the crisis and its implications
.
.
.
.
(continued)Comment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
I'm investigating possibilities now - but in broad strokes and with only my consideration to date:Originally posted by GRG55
Pound weakening vs. everything - seems like a pretty classic economic implosion coming on between the bursting of the LSE financial services model and the UK housing crisis. UK going into major deficit spending at a minimum.
No thoughts yet on Pound vs. S-Franc - normally I would expect would be a weakening vs. the S-Franc, but the entire 'hidden money' model is seriously weakened after the Lichtenstein/UBS deal.
I suspect there may be some money movement going on due to that alone.Comment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
Core inflation? That would surprise me. We have real inflation experts on this site who can weigh in on this but my sense of it is that it's not likely. Consider the housing component. The housing implosion is not considered in the US inflation number. In fact as housing goes under, it may drive rents up as demand increases.Originally posted by Mega View PostComment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
Why someone has to "warn inflation can fall" ?
In the real and simple world out here, that is considered a good thing :rolleyes: !
regards makkieComment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
Makkie, bear in mind that iTulip's investment thesis is founded on expectations of high inflation, which the Fed creates by expanding the supply of credit.
A lot of us here have based our investment decisions on this expectation, with positions in precious metals, foreign currencies, and other inflation hedges. So a period of deflation, or even low inflation (disinflation), is actually a bad thing for most of our portfolios.
The inflation/deflation debate is central to EJ's work, and so far, inflation has been winning, but a shift to deflation would change everything about our investment strategy.Comment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
Watch "inflation" when people are freezing to death in the US this winter... of course, that's not in the CPI...Comment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
It's always interesting that while the price level is rising food and energy are excluded and the focus of officials and the media is on "core" inflation (as Don Coxe says "There's no inflation as long as you don't heat and eat"), but now that energy and grains are falling, all of a sudden the "inflation rate" is going to plummet.Originally posted by phirang View Post
Hershey doesn't see any deflation judging by this item on Bloomberg this morning:
Hershey Shares Drop on Slowing Sales, Profit Growth in 2009
Aug. 15 (Bloomberg) -- Hershey Co. fell as much as 6.3 percent in late New York trading after the largest U.S. chocolate maker said it expected price increases to curb sales and profit growth in 2009.
Hershey said it will boost U.S. prices by an average 10 percent starting today to help counter rising cocoa, packaging, energy and shipping expenses. Commodity costs will probably climb twice as fast in 2009 as in 2008, and hedging and marketing expenses will also advance, the Hershey, Pennsylvania-based company said in a statement.
Comment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
That's consistent with the opinions of the CEOs of Dupont and dozens of other companies who have come out recently to warn about inflation.Originally posted by GRG55 View Post
What's the difference between "prominent analyst who set up Lombard Street Research" as referred to in the Telegraph article forecasting 1% inflation in 2009 and a guy who runs a private equity firm who forecasts double digit inflation in 2009? The private equity firm manager is accountable for his opinion.BusinessWeek
Bracing for Inflation
Monday August 18, 8:08 am ET
By John K. Castle
Growing evidence suggests American consumers, businesspeople, and political leaders should all be bracing for double-digit inflation, probably as early as 2009. The relative price stability of the past 15 years is giving way to worsening inflation, despite the recent softening of oil prices. The Consumer Price Index for all items shows the inflation rate averaged 2.6% a year from 1992 through 2007 but has doubled since January, reaching an annual rate of 5.6% in July (BusinessWeek.com, 8/14/08). By next year, the monthly figure could hit double digits, and the inflation rate for 2009 overall could triple 2007's 2.85%.
Comment
-
Re: Inflation to fall to LESS than 1 % next year!!!!
thanks for your response ajerimez2Comment
For a concise, readable summary of iTulip concepts developed over the past 16 years and a vision of a challenging next decade and how to navigate it, read Eric Janszen's book "Post Catastrophe Economy".
Join the discussion of today's events with a wide range of professionals with an interest in economics and finance. Register to join our 50,000 plus member registered community from 78 countries today.
Subscribe to iTulip Select for access to the longest running, deep, accurate, and unvarnished macro economic trends analysis and forecasting available, since 1998.
- If this is your first visit, be sure to check out the FAQ by clicking the link above. You may have to register before you can post: click the register link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below.
Working...
Tweet
Comment