Deflation: It's time to call a spade a spade.

[algerwetmore]

Re: Deflation: It's time to call a spade a spade.

I really don't think anyone has the "complete" picture. Certainly, one could argue the poor fundamentals of the U.S. dollar haven't changed, but when the market is driven by fear, it is anyone's guess where the dollar will end up.
I do lend some credence to the theory that unwinding hedge funds are driving down the price of gold, but if you look at the POG in Europe, South Africa, and Australia, you would tend to buy the disinflation argument.
I imagine that most of us on this board, listen and read to lots of commentary ( Korelin Report, Howestreet.com , Financial Sense.com, Gold321, Fleckenstein, Hussman, etc. and especially I-TULIP) It is after this, that we all make an educated guess. But the bottom line is: We recognized a few years ago that this country (U.S.A.) was in a financial mess, and we are trying to take steps to protect our families from economic debt, which produces indentured slavery.

[Sapiens]

Re: Deflation: It's time to call a spade a spade.

I find it comical when speculators call themselves “investors”.

You haven’t seen deflation yet (KA), and as far POOM, in my personal opinion it won’t happen. Why won’t POOM happen, because if you are a Usurer you know that this game is about control.

If you were paying attention you would have read about two years back that an investor should have been in T-bills, Gold and commodities.

Now, don’t base your price of Gold on the spot price because that is not it. Paper gold price and physical Gold price are not the same, as a matter of fact going forward they will have an inverse correlation.

You will know the real price of Gold when the system crashes and everyone is heading for the door, then you will understand what Gold is about. My family and I did quite well with Gold when Argentina collapsed, and we will do the same when U.S., Inc. re-orgs.

[we_are_toast]

Re: Deflation: It's time to call a spade a spade.

This will sound mean, but you really have no idea wtf you're talking about.

I have a hard time fully agreeing with any theory presented here due to my limited knowledge of economics, but I'm in full agreement with this statement. You're absolutely right, it is mean.

Economics is in not a science. I view economics as the attempt to study human nature. Since human nature is so unpredictable it may very well be an exercise in futility. Itulip seems to use a great deal of historic information in the belief that the fundamentals of human nature are steady. The conclusions we draw from any data concerning how people will react to given conditions are most certainly clouded by our own nature.

Now that I understand that you ( phirang) are a mean spirited S.O.B. that would try to publicly humiliate others who are simply trying to add to the discussion, it gives me a knew perspective on how I should view your posts. This of course has no bearing on any data that you might post, but it will certainly put your conclusions in a new light.

[ricket]

Re: Deflation: It's time to call a spade a spade.

This will sound mean, but you really have no idea wtf you're talking about.

I do know a couple of things.

#1 - My own sub-prime mortgage is ripe with fraud and Ive filed a fraud complaint against my own loan servicing company. I expect them to take a huge loss for perpetuating this fraud across all levels.

b) - My own "retirement plan" (Im only 26, so I've still got a ways to go), while down roughly 10% doesnt even compare to the losses my in-laws and everyone else has suffered (on average about 40%+ YTD).

*** - I run my own business in a small/local community and my opinion is that every other business is always looking to see how they can get the most stuff from free from everyone else. That's not how economies work, IMO and it's completely unsustainable. People eventually run out of free stuff (that they don't have to work to produce). So I see huge fundamental flaws in our economic model and it goes all the way up to the very top of our economic system, to the very tops of government. Cronyism is so baked into America's capitalistic system that you can't even grasp "how deep the rabbit hole goes".

iv: - My opinion is that you are a blowhard troll and you rarely back up anything you say with any sort of factual evidence or proof. The only argument you seem to offer for any of your statements is your sheer arrogance. [sarcasm] I mean, obviously since you're so sure of yourself, you *must* be right! [/sarcasm]

Phirang, you seem like someone who is pretty smart about alot of things, but you take your intelligence and use it as the only yardstick for your accuracy without backing up your statements with any sort of facts. Because of this, you seriously discredit anything that you say and people write you off because of this. If, as Im sure you will reply, that you don't care, then *why* are you here if you don't want to participate in any sort of meaningful discussion and all you want to do is drivel on and on about your own opinion and how right you are and how wrong iTulip has been and how helplessly punch-drunk all of their supporters are?

At this point in time phirang, face reality. The U.S. is in unsustainable debt territory and we do not have enough capital resources to service that debt for much longer. There are only two ways to erase a debt, you pay it off or you default on it. Given that the US Economy has been hollowed out and most of our manufacturing has been outsourced overseas (India, China, etc) then we are left with one option: We eventually default on our debt. After we default on our debt, there are two options: Bankruptcy or Inflation. Considering that in the course of history, inflation, and as such, debasement of currency has always been used as a mechanism of defaulting on debt (paying back bigger loans with less valuable money, ie not repaying back the full "value" of the debt, but pretending you are), then I dont see how anyone could ever imagine the Federal Reserve just standing on the sidelines and letting their shareholders go bust. It just ain't happening in my opinion unless there are serious social/political consequences and repercussions (such as massive protests, public executions, social chaos, etc).

[lurker]

Re: Deflation: It's time to call a spade a spade.

You haven’t seen deflation yet

Agree at the consumer level, but it feels like we're right on the hairy edge.

Why won’t POOM happen, because if you are a Usurer you know that this game is about control.

"First by inflation, then by deflation ......" If the debts were only those of the public then I'd agree with you but a significant deflation without a swift followup of inflation could kill the US government, consumer, economy and take decades to recover from. The parasites "userers" may not want to kill their host in the same way as they did in the 1930s... it's not clear that it's in their interest. Inflation/deflation is more of a balancing act than that for a userer. Keep the host alive and constantly bleed them.

This is also why I expect no FDIC insured account holders to lose money. It's important that the faith of the sheeple in the banking system remains intact for future fleecing.

You will know the real price of Gold when the system crashes and everyone is heading for the door, then you will understand what Gold is about.

Agree, hence it being referred to as insurance, and not an investment.

Thanks to sites like this I have become educated enough to know that I don't know enough to speculate. Therefore my first action is to pay of the mortgage. At least I can predict the outcome of that action. ;)

[sunskyfan]

Re: Deflation: It's time to call a spade a spade.

I guess my point is that the financial crisis correlates with the troubles with the advancement in computer technologies and its missuse.

Multi-processor paradigms as its soft brother concept, parallel processing problem solving, applies to only a few problems. Parallel processing has been a bust and has been for a long time. Multi-core chips only makes investors and company presidents feel better. It is the weapons of mass destruction story of the computer industry.

[Jim Nickerson]

Re: Deflation: It's time to call a spade a spade.

I do know a couple of things.

#1 - My own sub-prime mortgage is ripe with fraud and Ive filed a fraud complaint against my own loan servicing company. I expect them to take a huge loss for perpetuating this fraud across all levels.

b) - My own "retirement plan" (Im only 26, so I've still got a ways to go), while down roughly 10% doesnt even compare to the losses my in-laws and everyone else has suffered (on average about 40%+ YTD).

*** - I run my own business in a small/local community and my opinion is that every other business is always looking to see how they can get the most stuff from free from everyone else. That's not how economies work, IMO and it's completely unsustainable. People eventually run out of free stuff (that they don't have to work to produce). So I see huge fundamental flaws in our economic model and it goes all the way up to the very top of our economic system, to the very tops of government. Cronyism is so baked into America's capitalistic system that you can't even grasp "how deep the rabbit hole goes".

iv: - My opinion is that you are a blowhard troll and you rarely back up anything you say with any sort of factual evidence or proof. The only argument you seem to offer for any of your statements is your sheer arrogance. [sarcasm] I mean, obviously since you're so sure of yourself, you *must* be right! [/sarcasm]

Phirang, you seem like someone who is pretty smart about alot of things, but you take your intelligence and use it as the only yardstick for your accuracy without backing up your statements with any sort of facts. Because of this, you seriously discredit anything that you say and people write you off because of this. If, as Im sure you will reply, that you don't care, then *why* are you here if you don't want to participate in any sort of meaningful discussion and all you want to do is drivel on and on about your own opinion and how right you are and how wrong iTulip has been and how helplessly punch-drunk all of their supporters are?

At this point in time phirang, face reality. The U.S. is in unsustainable debt territory and we do not have enough capital resources to service that debt for much longer. There are only two ways to erase a debt, you pay it off or you default on it. Given that the US Economy has been hollowed out and most of our manufacturing has been outsourced overseas (India, China, etc) then we are left with one option: We eventually default on our debt. After we default on our debt, there are two options: Bankruptcy or Inflation. Considering that in the course of history, inflation, and as such, debasement of currency has always been used as a mechanism of defaulting on debt (paying back bigger loans with less valuable money, ie not repaying back the full "value" of the debt, but pretending you are), then I dont see how anyone could ever imagine the Federal Reserve just standing on the sidelines and letting their shareholders go bust. It just ain't happening in my opinion unless there are serious social/political consequences and repercussions (such as massive protests, public executions, social chaos, etc).

Well stated, young man. Hang in there.

[BrianL]

Re: Deflation: It's time to call a spade a spade.

Many computationally expensive problems can be solved with parallel processing. This includes research and industrial uses, but also includes consumer uses like video and image processing. Heck, people want to watch streaming video while instant messaging, typing a paper in Word (a beast in its own right) and having their machine scanned by Norton AV. These don't require parallel processing from a duration standpoint but are helped at a responsiveness level.

Writing general parallel processing software isn't easy. There is a huge amount of work being done at the library level to address this. If you compare this transition (at a tech timeline level) to UI tech evolution, we're still very early in the game. It will be a few more years before the software tech evolves and stablizes.

We're up to 24 cores now in the server market. If this proves to be excessive for consumer use, its because consumers are satisfied functionality they already have and software devs can't come up with a killer app (or killer environment) to leverage the multi-CPU machines.

[ricket]

Re: Deflation: It's time to call a spade a spade.

Many computationally expensive problems can be solved with parallel processing. This includes research and industrial uses, but also includes consumer uses like video and image processing. Heck, people want to watch streaming video while instant messaging, typing a paper in Word (a beast in its own right) and having their machine scanned by Norton AV. These don't require parallel processing from a duration standpoint but are helped at a responsiveness level.

Writing general parallel processing software isn't easy. There is a huge amount of work being done at the library level to address this. If you compare this transition (at a tech timeline level) to UI tech evolution, we're still very early in the game. It will be a few more years before the software tech evolves and stablizes.

We're up to 24 cores now in the server market. If this proves to be excessive for consumer use, its because consumers are satisfied functionality they already have and software devs can't come up with a killer app (or killer environment) to leverage the multi-CPU machines.

I use Adobe Photoshop/Illustrator almost daily and would love to have 24 processors chugging along while Norton ran and I typed a design proposal in Word. Now that weve got 64 bits and have the potential capabilities of terabytes of memory, then I can't wait to see what we can come up with.

Just think about all the protein folding that could take place in the background with those 20 extra processors Id have (I currently have a quad-core). Perhaps with a vast network of these, we really *could* cure cancer and I think that at that point, we would actually become capable of creating our own genetically unique species due to all of the things we would have learned about how proteins work during the cancer-curing research.

[ASH]

Re: Deflation: It's time to call a spade a spade.

Many computationally expensive problems can be solved with parallel processing.

This year I got an 8-core machine at work. Now I can run a Monte Carlo model on four of the cores while reading your post, editing a proposal, and listening to music on the others. I may not be a typical user, nor a driver of the PC market, but I think there's a lot of merit to what you say.

[xtronics]

Re: Deflation: It's time to call a spade a spade.

Unwinding of funny paper is not deflation. Go to your grocery store and look for prices that are going down. Just isn't happening (yet?). Stocks are down, oil is down commodities are down, but mostly on fears of just how much funny paper there is and how long we have to go before we hit bottom.

see http://www.shadowstats.com/alternate_data (yes, this lags a bit)

The big question is, "how long will it take to unwind all the funny paper?" With the government fiddling with things, it is going to take much longer than it should - collapses are fast - with the government propping things up, things will lean this way and that before tumbling down. There are funny housing loans with resets out to 2012. The rating companies have to be sued, put out of business, and replaced with new before any trust can return to the system. I'm afraid some of these things might take a while. In the mean time, the printing press is just getting revved up - and it takes a while for velocity to turn over the supply right now - the fire might start slow - but there is way to much kindling to say it is going out.

What should concern you more than inflation vs deflation of the dollar is the loss of good-will. The trust to do business is gone - the trust in the US government is sinking. I think it is quite probable that the dollar will lose its reserve currency status. Companies with funny books will start to be exposed and those with sound practices will be found - and rewarded.

The huge move to socialism in the last 8 years with the huge growth of government is inflationary - when will the teeth of inflation start to bite? Hard to say, as no one knows the extent of funny paper and funny book keeping. No one is talking about shrinking the size of government - I suppose if government keeps growing at the rate it is it starts to squeeze out the private sector. What happens as the biggest economy in the world goes socialist? I wonder if we just crossed a tipping point?

There is also the demographic effect - back in the 90's Harry S. Dent predicted a down turn in 2008 based on the tendency of spending to reduce as baby-boomers grow old. Was he on to something and later lost his way?

[ThePythonicCow]

Re: Deflation: It's time to call a spade a spade.

We eventually default on our debt.

That happens, in my guess, when the interest payments on that debt are getting too high to manage.

In other words, following up on your comments that one way to default is to inflate, paying back with devalued currency, then we will need to inflate (further debase) the dollar to the extent that the money paid out for Treasury dividends becomes too high a proportion of the tax money collected from Americans.

Unfortunately, in the simple mechanisms I understand, this creates a negative feedback loop. The inflation needed to cheapen the dollars we use to pay Treasury dividends also tends to force us to have to roll over Treasury debt at higher rates, causing further distress requiring further cheapening of the dollar.

Private citizens can get in the same downward spiral. When their credit is good, they can borrow at low rates. But if they start to display visible signs of financial distress to the lenders, then the interest rates on their rolled over debt increase, increasing their distress.

But the Fed/JPMorgan/Treasury cartel has tools (Congress critters, media whores, bureacratic buffoons, ignorant masses, ...) and financial devices at its disposal that I could not even imagine, much less understand.

It's like living with a crack addict who is also substantially smarter and more devious than yourself. Years of drama, deceipt, and denial can transpire, between when that person ceases being a net positive contributor, and finally succumbs to the fatal overdose.

I wonder if that means that KaBoom should really be Ka ..... Boom, allowing for a period of possibly years between the disinflationary (or whatever the proper word is) collapse and the subsequent fatal drug response to the hyperinflationary overdose. Those years would be filled by an awful variety of drama, deceipt, and denial from our Central Banking Cartel.

One more thing to be leary of ...

Our Treasury dividend payments owed are still not an unbearable proportion of our tax revenues. We might not yet be at the final Ka ..... Boom for the American dollar. Some more talented and resourceful crackheads can continue to get through life, seeming to succeed, long after their habits would have killed most weaker souls.

[sunskyfan]

Re: Deflation: It's time to call a spade a spade.

All good anecdotes but not representative. I have been a Software Engineer/Systems Analyst for 25 years now. The national labs of poured tons of money into parallel processor algorithm development with not much to show for it.
Multi-tasking is a very different thing than parallel processing. Whether you have 24 processors with each dedicated to a window or one dithering between the 24 very quickly doesn’t make much difference from a human productivity point of view. Granted, for those running huge survey models or rendering animations it is nice to have all those cpus going but for the rest of the 99.9% of the economy it means pretty much nothing.
Computers should be looked at as an amplifier of human activity not a commodity with innate value in itself. That perhaps is the fundamental assumption that has caused our great economic difficulties. Computer models, in Science or Economics, can be wonderful things that provide lots of insight and if the right person at the right time makes a correlation from looking at these models can make things happen. They do not guarantee validity of theory or intrinsically increase understanding though. In the wrong hands it usually goes the other way.
In other words …

stupid*computer = really stupid
Smart*computer*ethical = really clever – “really full of it”

I would say there the economies ethics has been negative so the “really full of it” crowd is dominating the really clever crowd with a lot of really stupid thrown in ...

[ThePythonicCow]

Re: Deflation: It's time to call a spade a spade.

Unwinding of funny paper is not deflation.

It's not deflation of grocery store prices. It's deflation of funny paper prices.

The words inflation and deflation have become too emotionally overloaded in the discussions of the day, with the not too surprising (given the well known and customary weaknesses of emotions) result that people are unconsciously using the words with diverse meanings.

I would encourage those making statements with those words to gently, but explicitly, spell out of which asset class they are discussing the inflation or deflation.

I would enourage sympathetic listeners to statements containing such words to look about for some asset class that the author might have had in mind, for which the authors statements might make more sense.

[Jim Nickerson]

Re: Deflation: It's time to call a spade a spade.

That happens, in my guess, when the interest payments on that debt are getting too high to manage.

In other words, following up on your comments that one way to default is to inflate, paying back with devalued currency, then we will need to inflate (further debase) the dollar to the extent that the money paid out for Treasury dividends becomes too high a proportion of the tax money collected from Americans.

Unfortunately, in the simple mechanisms I understand, this creates a negative feedback loop. The inflation needed to cheapen the dollars we use to pay Treasury dividends also tends to force us to have to roll over Treasury debt at higher rates, causing further distress requiring further cheapening of the dollar.

Private citizens can get in the same downward spiral. When their credit is good, they can borrow at low rates. But if they start to display visible signs of financial distress to the lenders, then the interest rates on their rolled over debt increase, increasing their distress.

But the Fed/JPMorgan/Treasury cartel has tools (Congress critters, media whores, bureacratic buffoons, ignorant masses, ...) and financial devices at its disposal that I could not even imagine, much less understand.

It's like living with a crack addict who is also substantially smarter and more devious than yourself. Years of drama, deceipt, and denial can transpire, between when that person ceases being a net positive contributor, and finally succumbs to the fatal overdose.

I wonder if that means that KaBoom should really be Ka ..... Boom, allowing for a period of possibly years between the disinflationary (or whatever the proper word is) collapse and the subsequent fatal drug response to the hyperinflationary overdose. Those years would be filled by an awful variety of drama, deceipt, and denial from our Central Banking Cartel.

One more thing to be leary of ...

Our Treasury dividend payments owed are still not an unbearable proportion of our tax revenues. We might not yet be at the final Ka ..... Boom for the American dollar. Some more talented and resourceful crackheads can continue to get through life, seeming to succeed, long after their habits would have killed most weaker souls.

-Cow,

It's good to see someone who has cojones enough to put something in their bio's that give the others of us a bit of insight into who you may be.

What is a "pythoniccow"? Not that that is really important.

Several years ago I asked the same question regarding why "poom" and not "boom." I think the answer was something along the line that "boom" in association with economy implies that something worthwhile is truly occurring; whereas, "poom" was chosen to imply an explosion of inflation which to some might feel good, but which truly it is not worthwhile or in all's best interest.

EJ or FRED I hope will correct me where I am wrong.