Credit inflation, Deflation: Prechter Interview

[Jim Nickerson]

Re: Credit inflation, Deflation: Prechter Interview

December 20, 2006
Wholesale Inflation - Energy And Cars Taketh Away And Giveth Back
by Paul Kasriel

http://www.safehaven.com/article-6549.htm

"In September and October, energy prices at the wholesale level fell. In November, they rose. In October, motor vehicle prices at the wholesale level fell. In November, they rose. In September and October, seasonally-adjusted wholesale prices at the finished goods level fell 1.3% and 1.6%, respectively. In November, these prices rose 2.0%. Even with the latest month's increase, the November level of the finished goods PPI remains below the April level. Looking at producer price changes on a year-over-year basis in order to separate the signal from the noise, the chart below suggests that cyclical peak for finished goods inflation occurred back in September 2005 and for intermediate goods inflation in October 2005. At less than 1% year-over-year, finished goods PPI inflation in November hardly looks threatening. As an aside, at the consumer goods level, Circuit City's disappointing latest quarterly earnings report suggests that there might be a whiff of deflation in the air. From flat screen TVs to the McMansions to watch them in, prices are falling absolutely. And the sellers of these products are not making it up on volume. Are the big-box retailers and home builders following in the footsteps of the Big Three auto producers?" [JN empahasis]

[Jim Nickerson]

Re: Credit inflation, Deflation: Prechter Interview

The Specter of Deflation by Michael Nystrom December 28, 2006

http://www.bullnotbull.com/archive/deflation-1.html

This is first of two parts Nystrom plans. I did not find what Nystrom put forth as compelling with regard to the possibility of deflation. He has a quote from von Mises, "The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The credit expansion boom is built on the sands of banknotes and deposits. It must collapse. There is no means of avoiding the final collapse of a boom brought about by credit expansion." [emphasis is Nystrom's].

If one finds von Mises credible, then that is compelling, unless you, like Clinton, wish to question the essential meaning of a two-lettered word--"no."

Nystrom makes a reasonable argument to gold running up coincident with the time Bernanke was appointed by Bush. Bernanke having the reputation of a money printer (or credit expander) might account for the 270 bonar pop in gold from Fall 05 to earlier this year, 2006.

[Jim Nickerson]

Re: Credit inflation, Deflation: Prechter Interview

http://www.financialsense.com/fsu/ed...2007/0109.html

IS THE COMMODITIES BULL GETTING BURIED UNDER THE HOUSING RUBBLE? by Jas Jain January 9, 2007

Jain concluded his article, "I can say lot of negative things about Bernanke, but he will NOT inflate. Yes, he will try very hard to stop deflation, but he would fail because there are limits to Fed’s control of the economy. The reason he would fail is that he is very explicit about how he would go about stopping deflation – by “boosting the aggregate demand.” Well, what if people decide not to consume more out of various constraints due to their personal financial circumstances? Please don’t tell me that the govt. and the Fed can control the economy as when they choose and as they please. Sometimes they can and at other times they can’t. We will go the way of the Soviets if we try too hard to control, or manage, the economy. Soviets managed production and we are trying to manage consumption via fiscal and monetary polices.

The worst years of the Housing Bubble’s burst still lie ahead. And the same should be the case for the bursting of the Commodities Bubble. We will know that the dye is cast when the crude oil goes below $40 a barrel and copper below $2 per pound. Maybe, the beginning of the next recession would get us there. That means sooner than most think."

The reason I posted this is to keep up with it for later reference. I suppose at some time later, we can all look back and see who was right about will disinflation, deflation, inflation occur and when and in what order.

[jk]

Re: Credit inflation, Deflation: Prechter Interview

http://www.financialsense.com/fsu/ed...2007/0109.html

IS THE COMMODITIES BULL GETTING BURIED UNDER THE HOUSING RUBBLE? by Jas Jain January 9, 2007

Jain concluded his article, "I can say lot of negative things about Bernanke, but he will NOT inflate. Yes, he will try very hard to stop deflation, but he would fail because there are limits to Fed’s control of the economy. The reason he would fail is that he is very explicit about how he would go about stopping deflation – by “boosting the aggregate demand.” Well, what if people decide not to consume more out of various constraints due to their personal financial circumstances? Please don’t tell me that the govt. and the Fed can control the economy as when they choose and as they please. Sometimes they can and at other times they can’t. We will go the way of the Soviets if we try too hard to control, or manage, the economy. Soviets managed production and we are trying to manage consumption via fiscal and monetary polices.

The worst years of the Housing Bubble’s burst still lie ahead. And the same should be the case for the bursting of the Commodities Bubble. We will know that the dye is cast when the crude oil goes below $40 a barrel and copper below $2 per pound. Maybe, the beginning of the next recession would get us there. That means sooner than most think."

The reason I posted this is to keep up with it for later reference. I suppose at some time later, we can all look back and see who was right about will disinflation, deflation, inflation occur and when and in what order.

the biggest consumer of all is the federal government, and i think it can be relied upon to keep consuming and to keep increasing its consumption.