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**Chris Coles** · September 16, 2008, 10:04 AM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

Originally posted by GRG55 View Post

This is the expected outcome Herr Finster. But it seems that the market is currently treating both as some sort of commodity. As you state, gold, more than oil, is normally the refuge during times of fear. I can imagine few financial market scenarios that could engender more fear than the events this weekend. That gold has hardly moved up, while oil declines yet again, is [in my mind] hardly worthy of any material distinction between the two. Under these circumstances the surprise to me is that gold remains at such remarkably subdued prices.

We need to think the situation through. First of all there are many thousands of "traders" no longer at their desks. So the volume of trade is reduced. Then those that are left are looking at any which way they can still make money and the place to go right now is shorting other financials.

HBOS shares bear brunt of selling

HBOS share price
UK bank share prices

Shares in UK bank HBOS are leading a steep decline in UK stocks as turmoil on financial markets intensifies. Investors are concerned that HBOS is too dependent on money markets to fund its lending as the cost of borrowing shoots up. Shares in HBOS were down 34%, or 79.5 pence, at 153p after an 18% fall a day earlier. Many other bank shares have also been hit.

http://news.bbc.co.uk/1/hi/business/7619242.stm

From this we can surmise that it may be some days before the run on financials loses momentum and then we have to also realise that the "traders" will be equally constrained by the oldest problem of all - Settlement. Their share prices are falling like water down a cliff and thus they may be unable to settle the trades they have in place.

All this will inevitably mean that trading must be suppressed by these natural functions of an unstable marketplace. And that leads me to believe that all commodities will for a while become more stable. But when TSHTF as the realisation sinks in, then Gold will surely take off like a rocket??

**sunskyfan** · September 16, 2008, 10:09 AM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

Gee, a choice between conspiracy theory and control theory

... my heart goes pitter-patter ...

Actually, the current economy does resemble Vista ... looks great ... doesn't work very well ... but to the point ... you expect the guys that created this mess to be smart enough to get us out? Deflation is a measure of a lack of confidence ... it is happening and it is comming ...

jk · September 16, 2008, 10:30 AM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

Originally posted by sunskyfan View Post

Deflation is a measure of a lack of confidence ... it is happening and it is comming ...

gee, and here i thought accelerated inflation is a measure of a lack of confidence.;)

**grapejelly** · September 16, 2008, 10:47 AM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

Originally posted by LargoWinch View Post

perhaps they can print a $50 Trillion note?

I love it!!!

**Chris Coles** · September 16, 2008, 11:01 AM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

Originally posted by GRG55 View Post

This sounds like a shutdown and re-boot...something that Microsoft's crappy operating system requires on a regular basis, just to keep ones PC operating.

But thankfully the global economy wasn't created in Redmond, and it is not going to "turn off". ...

With the greatest of respects, banks have only recently been the be all end all. In the past good old cash was the staple of the economy. In fact, we do not need banks at all; they only derive from the perceived problems with using large sums of cash. If we all turned back, away from plastic and back to cash, no, not forever, but for long enough for the present bunch of idiots to evaporate like their vapour ware, then in that case, the banking industry is as miss-able as a large hole in the floor.

We do not need banks.

**sunskyfan** · September 16, 2008, 11:52 AM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

hum ... can you think of anything that you would pay more for today than yesterday if your confidence in it or yourself is lower today than yesterday? Accelerated inflation is created by a certainty that things will be more expensive tomorrow so you pay more today. What on earth is certain about tomorrow in this situation?

jk · September 16, 2008, 12:09 PM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

Originally posted by sunskyfan View Post

hum ... can you think of anything that you would pay more for today than yesterday if your confidence in it or yourself is lower today than yesterday? Accelerated inflation is created by a certainty that things will be more expensive tomorrow so you pay more today. What on earth is certain about tomorrow in this situation?

how about accelerated inflation is created by the uncertainty about whether you will be able to afford to buy tomorrow that which you can definitely afford to buy today? :rolleyes:
[i think generic certainty/uncertainty is not that useful a concept in this context.]

**GRG55** · September 16, 2008, 12:28 PM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

Originally posted by sunskyfan View Post

Gee, a choice between conspiracy theory and control theory

... my heart goes pitter-patter ...

Actually, the current economy does resemble Vista ... looks great ... doesn't work very well ... but to the point ... you expect the guys that created this mess to be smart enough to get us out?...

Don't have any idea how you came to that conclusion?

Originally posted by sunskyfan View Post

Deflation is a measure of a lack of confidence ... it is happening and it is comming ...

Good to see that, despite the past half-decade of experience with the consequences of currency abuse, securing American public [and political] support for more Dollar-debasing reflationary policies is a slam-dunk.

Amazing. But not surprising...:p

**sunskyfan** · September 16, 2008, 12:42 PM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

perhaps you are right ... I would point out that my example is one in which a person uses experience ... "today vs. yesterday" and yours is where one uses anticipation and prediction "today vs. tomorrow" ... we remember better than we predict (usually

)... perhaps that is the key ...

**sunskyfan** · September 16, 2008, 12:49 PM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

I think you missed my point ... the deflation comming is irrelavant to what the central banks do ... they can take interests rates to zero but if no lending or borrowing is happening big deal! ... the damage has already been done ... these guys are flailing or better put the system is ringing and they are reacting as if they have control ... they don't ...

**c1ue** · September 16, 2008, 12:59 PM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

Folks,

Inflation or deflation has an impact on real-time purchasing power expended for products, but the real issue lies with expectations of inflation or deflation.

It is expectations of inflation which drive wage increase demands and lack of saving; the flip side is expectations of deflation drive savings.

Japan is a good example of the latter, while most any hyperinflationary episode is a good example of the former.

That is why the present situation is so interesting: we've had a period of inflation, and we're now having a period of (relative) deflation.

From an expectations management standpoint, this is perfect.

**Supercilious** · September 16, 2008, 04:34 PM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

Originally posted by c1ue View Post

From an expectations management standpoint, this is perfect.

Exactly! This is what I would call a financial environment of unprecedented opportunity.

Of course one may ask who will benefit form this great opportunity and huge wealth transfer process. The answer is simple: the usual suspects ...

**The Outback Oracle** · September 16, 2008, 04:53 PM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

[... we remember better than we predict (usually

)... perhaps that is the key ...[/QUOTE]

Sunsky...that may be an age thing

maybe you aren't as old as JK and I!

**phirang** · September 16, 2008, 04:54 PM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

Originally posted by $#* View Post

Exactly! This is what I would call a financial environment of unprecedented opportunity.

Of course one may ask who will benefit form this great opportunity and huge wealth transfer process. The answer is simple: the usual suspects ...

Which means that my original thesis that was wrong should soon become right!

**bill** · September 17, 2008, 09:12 AM

Re: Bear, Fannie/Freddie, Lehman... DEFLATION? Bwah ha ha ha!

Originally posted by metalman View Post

here's your deflation!

fed expands

http://www.bloomberg.com/apps/news?p...PEU&refer=home
Treasury Says Will Issue Debt to Help Fed Manage Balance Sheet

By John Brinsley and Rebecca Christie
Sept. 17 (Bloomberg) -- The U.S. Treasury said it will sell bills to allow the Federal Reserve to expand its balance sheet, a day after the government agreed to take over American International Group Inc.
``The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve,'' the department said in a statement today. ``The program will consist of a series of Treasury bills, apart from Treasury's current borrowing program.''
To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net John Brinsley in Washington at jbrinsley@bloomberg.net
Last Updated: September 17, 2008 10:03 EDT

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