Newsflash: Deflation may be next threat!

[phirang]

Re: Newsflash: Deflation may be next threat!

don't take my word for it. find an example of a debtor that defaulted and experienced an appreciation of its currency.

no hurry. i'll wait here.

Dude, a default of the US implies total seizure of the global economy. There is no shortage of dollar reserves ready to be sacrificed to the credit demons to get the economy going again, especially if your a shitty BRIC or a banannaOPEC.

It'll be a warm day in "Hell", MI before the dollar-reserve holders let things stop: well, they tried, and realized they'd lose EVERYTHING while the US would just lose SOMETHING.

btw: I used to live in MI, and so I've actually been there.

[c1ue]

Re: Newsflash: Deflation may be next threat!

Dude, a default of the US implies total seizure of the global economy. There is no shortage of dollar reserves ready to be sacrificed to the credit demons to get the economy going again, especially if your a shitty BRIC or a banannaOPEC.

It'll be a warm day in "Hell", MI before the dollar-reserve holders let things stop: well, they tried, and realized they'd lose EVERYTHING while the US would just lose SOMETHING.

If you repeat it enough, maybe it will come true?

I think you're assuming that somehow a US default - actual or effectively via inflation - is somehow avoidable.

The point is that it is not and will not be.

More importantly, how can the US force other nations to continue to sell at vendor discount? When the net both short term and long term is negative?

Plus the other nations DO trade with each other, and DO create value on their own. The assumption being made is the old "if you owe the bank 1 dollar, it is your problem. If you owe the bank 1 million dollars, it is their problem"

But that doesn't work for governments which have something the US needs: oil, cheap labor, etc.

[dcarrigg]

Re: Newsflash: Deflation may be next threat!

Agree, but that isn't now.

The EU is clearly the biggest loser in all of this... something most didn't expect 6 mths ago.

It's actually nice that Russia is taking Iceland... time to scare the shit out of the EU and bring them back into the Greenback Cult.

muahahah!

Baguette and German trade surpluses will finance our next war of domination... muhaha!

http://www.reuters.com/article/usDol...00568220081008

[Supercilious]

Re: Newsflash: Deflation may be next threat!

don't take my word for it.

I hope you realize I'm not taking your word for anything
In conclusion you are not able to provide a verifiable "demonstration"

Actually I'm taking nobody's word for granted. Do you remember when EJ explained some two weeks ago why the Fed can't lower the rates?

Here is my review of that demonstration:

http://www.itulip.com/forums/showthr...3204#post53204

The proof of my demonstration can be learned today from every newspaper

[Kcim67]

Re: Newsflash: Deflation may be next threat!

http://www.reuters.com/article/usDol...00568220081008

Maybe afetr 60 yrs of sticking with crazy scaremongering capitalist kings of doom, us old europeans will realise that America and Australia where places we sent our criminals and in reality they never ever moved on, so back to the old regimes and decide maybe China or Russia may be less pshycotic bed fellows!

[tombat1913]

Re: Newsflash: Deflation may be next threat!

15 months... OFF and ON

no deflation cycle!

deflation = sticking a toe in the quicksand

deflation cycle = standing in quicksand

inflation = wet

inflation cycle = underwater

the distinctions that everyone is groping for are re self-reinforcement or not.

a fire, whether deflation or inflation, is no big deal. a firestorm is.

ej has proved a deflation CYCLE is impossible for a net debtor. it can't for the obvious reason that at some point the currency crashes and cuts off the process. deflation is self-limiting for debtors. grossly. totally.

POOM!

Thank you, I understand the distinction much better now.

[due_indigence]

Re: Newsflash: Deflation may be next threat!

Yes, the time factor/duration helps denote the phenonomenon. We should be wary of interpolating trends from mere events. Jesse's Cafe Americain says it well. A short-term liquidity crunch is being misinterpreted by some as a deflationary trend.

"It is possible to turn this into a deflation, given time and a tightening of the money supply relative to economic growth. The word 'moment' is the tipoff here. There are no 'moments' in a real inflation or a real deflation. They are trends of weeks and months and sometimes years. Short term events, whether due to a storm, the collapse of a company, a panic, are just that: events."

http://jessescrossroadscafe.blogspot...ry-moment.html

[Starving Steve]

Re: Newsflash: Deflation may be next threat!

The banks won't lend because the Fed is insane with its 1.5% interest rate;

plus the Saudis won't pump if the U.S. prints and trys an Argentina scenario;

plus China and the world will begin to sell U.S. debt if the U.S. trys the Argentina scenario;

plus the baby-boomers need to save for retirement;

plus wages and prices are falling already, along with commodities, energy prices, and asset prices;

= DEFLATION.

Any doubts in the peanut gallery? Check the price of gold.

And this will keep gold bugs up at night: Obama may well appoint Paul Volcker to the Fed and replace Helicopter Ben, so interest rates may just go sharply higher now. The Libor rate and the failure of current Fed policy to loosen credit markets may well be signalling that a change of course on Fed interest rate policy is in order..... Enjoy.

[Guest]

Re: Newsflash: Deflation may be next threat!

Steve - you are sowing confusion, not any clarification with these points. The banks refusal to lend has little or nothing to do with the ultra low rate. It has to do with the assurance of repayment. The Saudis will play a responsible role in "pumping" as they always have, their making noises about cutting back production is in response to soft global consumption. Credit is totally locked up worldwide and the capillaries of commerce are starting already into the earliest stages of dying, which is indeed deflationary.

"Any doubts from the peanut gallery" (because gold is falling) is not analysis. Your main misunderstanding here seems to be the belief that the mere raising of interest rates would unblock the frozen credit. In an absolute, academic sense yes, it would, but in a practical immediate sense it does not make a damn bit of difference. They only don't lend because they wonder if they will get the principal back. Even two or three percentage points higher yield on the loan would not provide one jot of increased assurance of repayment.

The banks won't lend because the Fed is insane with its 1.5% interest rate, plus the Saudis won't pump if the U.S. prints and trys an Argentina scenario = DEFLATION. Any doubts in the peanut gallery? Check the price of gold.

[Starving Steve]

Re: Newsflash: Deflation may be next threat!

The fact that banks won't lend ---- for whatever reason ---- is deflationary in the extreme. Credit has been shut-off, and the alcoholic now has to sober-up.

I agree with you that banks now refuse to lend more because of their fear of loss of principal on a loan than on any fear about the interest rate of lending. But rising risk and fear is part of the deflation process.

Oh, this is so wonderful. I love it.... This had to come.

I have lost plenty on my oil and gas trusts, and I will lose more if they go bankrupt. But this deflation is much better than a hyper-inflation outcome.

[Guest]

Re: Newsflash: Deflation may be next threat!

Steve - Is EJ going to wind up eating his hat?? :eek: :eek: :eek:

The fact that banks won't lend ---- for whatever reason ---- is deflationary in the extreme. Credit has been shut-off, and the alcoholic now has to sober-up.

I agree with you that banks now refuse to lend more because of their fear of loss of principal on a loan than on any fear about the interest rate of lending. But rising risk and fear is part of the deflation process.

Oh, this is so wonderful. I love it.... This had to come.

I have lost plenty on my oil and gas trusts, and I will lose more if they go bankrupt. But this deflation is much better than a hyper-inflation outcome.

[Starving Steve]

Re: Newsflash: Deflation may be next threat!

Who is EJ? :confused:

[Guest]

Re: Newsflash: Deflation may be next threat!

He's the groundskeeper, or janitor here. AKA the guy that pays the electric bill to keep the servers here running.

Who is EJ? :confused:

[friendly_jacek]

Re: Newsflash: Deflation may be next threat!

This thread is so behind the curve! Deflation WAS the recent threat. The question is what next. The below chart could be instructive:

[Supercilious]

Re: Newsflash: Deflation may be next threat!

This thread is so behind the curve! Deflation WAS the recent threat. The question is what next.

I believe you are correct. The deflation danger has already started in mid July. My guess is that a short inflationary shock (controlled in US by the Fed and allowed to wreak havoc in ROW)) is to follow soon. Probably it will start while most of the people would still wear brown pants of deflationary spiral and talk about the catastrophic spectrum of a global deflation crisis.