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

[sunskyfan]

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

I think I am getting your lingo here. Or .. maybe not. :confused: Is the difference between deflation and disinflation that deflation happens when both cpi and real wages fall together and disinflation is where cpi only falls?

[sutro]

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

yeh, not sideways. that was wishful thinking.

tolerable if all goes according to logic in the long run, tho.

counting trillions will get you nowhere. it's all about flows and add this.

that's the money NOT coming in.

here's the money going out...

get it?

ignore the noise. listen to the signal.

a better line of discussion... where the hell is all of that money going to... and NOT coming from?

A mattress in the Caymans?!?!?

[zoog]

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

I think I am getting your lingo here. Or .. maybe not. :confused: Is the difference between deflation and disinflation that deflation happens when both cpi and real wages fall together and disinflation is where cpi only falls?

From the iTulip Glossary ()

deflation : n. negative rate of inflation, e.g., "CPI inflation averaged -1.3% in 2007."

disinflation : n. declining rate of inflation, e.g., "CPI inflation declined to 2.1% in Q4 2007 from 2.5% in Q3 2007."

Basically, if the rate of inflation is falling from some positive value, it is disinflation. If it continues to drop and actually goes below zero, then it becomes deflation. Until the inflation rate is below zero, inflation is still rising, just not as fast as it was previously.

[plinko]

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

Well, with EJ's love of looney tunes, maybe his next video will include this to represent how we're feeling right now:

"Where's the kaboom??!? Where's the earth-shattering kaboom?"
http://www.youtube.com/watch?v=WoKvR2Y1t8Q
Martian's rational argument
http://www.youtube.com/watch?v=Cwxc_zLH560

[sunskyfan]

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

Not to be argumetative but I have trouble understanding the relavance of any inflation/deflation/disinflation measure that does not include the wages/income of people or corporations.

Also, the assumption that there can be no deflation (based on the itulip definition cannot happen) is possible in a fiat currency economy. This assumes that money cannot destroyed in the economy. The aborbing of bad securities or other types of paper by the government as just has been started is effectively the destruction of money .... thus you could have a true deflation with fiat money.

[laphroaig]

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

From the iTulip Glossary ()

Basically, if the rate of inflation is falling from some positive value, it is disinflation. If it continues to drop and actually goes below zero, then it becomes deflation. Until the inflation rate is below zero, inflation is still rising, just not as fast as it was previously.

Sounds precise, but sadly it's not. Whether or not you have "deflation" depends what timescale you measure change in CPI over.

If it's quarterly, it's easy to get deflation. If you measure price changes against a year ago, a lot of the volatility is ironed out, and you are much less likely to hit "deflation".

Interestingly, in "The Truth About Deflation", EJ's graphs look to be using quarterly data, and various points where the graphs go negative are marked "no deflation". Not quite in accordance with the provided definitions

However, I suspect that if you redrew the graphs with an annual moving average, you'd see this "no deflation" more clearly (i.e. the graph would never cross the zero line).

[Verrocchio]

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

With regard to calls for EJ to go head-to-head with Roubini, to account for the poor performance of investments made based on subscribers' perception of his analyses, and so forth, I offer a simple and time-tested rule of the gaming tables. You pays your money, and you takes your chances. Whinging about losses and seeking to blame your decisions on someone else doesn't improve your investment results.

On the other hand, a positive outcome has ensued. EJ presented support for the Ka-Poom thesis, has patiently explained several anomalies that have appeared frequently over the past week or two, and given readers who are perceptive a better understanding of where the US and global economies are headed. Thank you, EJ.

[Guest]

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

Spot on Verrocchio. EJ aces it. I'm wondering what aguments proponents for a blistering global outbreak of deflation have now.

I am one of the least tutored contributors here although I've been reading around a while. But even I could spot the flabby logic at the core of the deflationist thesis. You are presented with charts evidencing a country with a critical balance of payments problem, where the charts evidence a parabolic blowoff of foreign investment since the early part of this decade, where the parabola BLEW UP and the net fund outflows describe a savage turn down every bit as ugly as the current commodities index chart.

Gee, what does that mean EJ? I look around and see only horrific deflation in the world, and all my stocks and commodities are getting massacred! That means YOU WERE WRONG EJ! You misguided us and led me to allow my own greed to load up on tons of small cap stocks that are now eating me alive! Blah blah blah.

Question: How the heck can you stage a GLOBAL DEFLATION when the unit of measure that global deflation is being defined AGAINST, the USD, is describing a net funding problem for the US that looks like a heart attack? The US funding problems are steering straight towards a "sudden stop", the global heart attack was caused by poisonous asset backed securities issued by this same country, and you see that currency soaring on the exchanges like a saturn booster rocket.

You've been reading here for umpteen gazillion weeks and months, and you conclude that the collapse of asset values against THIS DOLLAR are describing a true global deflation? What abdication of reason, what supreme mental laziness permits the people here to insist that DEFLATION can define itself against a currency that according to the charts is entering into an explosive parabola? I have in recent days read some of the very smartest iTulipers, the ones who are more sophisticated than all the rest, completely enthralled by this thesis.

Imagine you are on a boat, and the boat is pulling away from the pier. There is a cognitive psychologist standing next to you who asks you, "is this boat pulling away from the pier? and you answer "Yes. I can see with my own eyes that it is pulling away". He then directs your gaze to the bottom of the pier, and you see that the peer is sitting on pontoons, and that it is moving away from the boat. This is the analogy for the USD as the UNIT OF MEASURE, by which you claim to see all the world's asset values dropping. The USD is in a parabolic, blowoff trajectory.

Meanwhile, EJ has just posted a detailed analysis of why the US current account deficit plunging like a freight train headed for an almighty smackup, AND the USD soaring like some gorgeous Phoenix bird, suddenly both hae become metrics for an ironclad currency unit. In fact BOTH trends are painting charts that are screaming **unsustainable**, that present highly dangerous visually stunningly obvious sickly and anomalous "end-game" trends.

We look at these charts and we can SEE the parabola in the USD, we can see the parabolic trends in the exodus of funds from the US and the dropoff of central bank aus debt purchases. But we are instead gibbering and pointing to "collapsing asset values" and shrieking that the entire original call was wrong because now we have "deflation" worldwide.

Even Rick Ackerman, one of the foremost and earliest deflationist writers, one who lucidly described exactly this parabolic USD breakout FIVE YEARS AGO, has now gone on record noting A) the USD is totally worthless, and B) it's parabolic will reverse wickedly fast and with zero warning, and gold will rise in response so fast that it may spike to $5000 an ounce within days and leave you no room even to have sold it, let alone bought it in time at all! This guy has the chops - he has been writing about this collapse and the dollar surge since the early part of this decade.

Please pardon my brusque observation - I think all the people squawking here about global deflation and how horribly we've been misled by iTulip's thesis, have a burden now to fulfil for their own good. Rethink all your premises, and most of all stop to consider - how in hell do you even DEFINE a "global deflation" if the unit of measure is so glaringly in it's terminal manic phase as is the USD? To use a Finster expression: "what is your unit of measure"? And if your unit of measure is the USD, then note the unit of measure you have chosen for your entire argument is hopelessly compromised, and your deflation argument, complete with the whinging directed at EJ, reveals SLOPPY "situational awareness".

[ end rant ].

With regard to calls for EJ to go head-to-head with Roubini, to account for the poor performance of investments made based on subscribers' perception of his analyses, and so forth, I offer a simple and time-tested rule of the gaming tables. You pays your money, and you takes your chances. Whinging about losses and seeking to blame your decisions on someone else doesn't improve your investment results.

On the other hand, a positive outcome has ensued. EJ presented support for the Ka-Poom thesis, has patiently explained several anomalies that have appeared frequently over the past week or two, and given readers who are perceptive a better understanding of where the US and global economies are headed. Thank you, EJ.

[GRG55]

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

I've been a devout follower of EJ and iTulip for a few years going, and while I sincerely appreciate all the effort and knowledge exhibited here, it's time to pony up and call the current situation what it is: DEFLATION, not disinflation.

Disinflation is a reduction of the rate of inflation, potentially to zero, or perhaps into slightly negative territory for a short period of time. But when the dollar is rocketing upward, and the price of stocks, commodities, precious metals, real estate, and just about everything else is crashing, it becomes increasingly ludicrous to pretend we're in a merely disinflationary environment.

Perhaps this situation will run its course within a matter of weeks or months and the dollar will resume its long-term slide. Or perhaps it will last as long as the recession - a year or more. What difference does it make when you've lost 50% on your portfolio of commodities and gold, and could have sold out months ago?

I also want to take issue with iTulip's "Dollar Ratchet" theory, which back in July had called for a months-long period of sideways movement for the dollar before it turned downward, and for gold to bounce off a low of $780 and turn skyward. This theory obviously failed to account for some major influences on the value of the dollar. Can you even honestly call it a theory? Was it based on anything more than a glance at the dollar index over the last seven years?

I don't pretend to have anything close to EJ's understanding of money and economics - I'm just a private investor trying to preserve what little wealth he has. But I think that the folks at iTulip, if they want to preserve their credibility, need to drastically re-think their position, admit to their mistakes, and present a revised set of expectations for the benefit of all iTulip readers. And here's a tip: pretending that iTulip never endorsed gold as an investment doesn't help its credibility.

I still expect that, years from now, I will be glad I followed the advice of iTulip, Jim Rogers, Mega's pet monkey, et al. But for the time being, I'm starting to feel like a punch-drinking member of an inflation-cult who's getting ready to meet an alien spaceship that somehow never arrives.

Deflation? What deflation???

Bet these guys would like to see some deflation.

Looks like good old stagflation [falling sales, rising input costs, falling employment] to me...

Whirlpool posts lower profit, cuts more jobs

Tue Oct 28, 2008 8:13am EDT

ATLANTA (Reuters) ...In North America, Whirlpool's biggest market, sales fell 7 percent to $2.7 billion, and higher materials costs led to a decline in operating profit...

...The 5,000 job cuts include plant closures that have already been announced as well as new reductions, the company said...

[GRG55]

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

I have to travel from Canada to Australia next month to attend the annual shareholders meeting of a company of which I am a Board member. The Canadian $ airfare to get there is up more than 35% in less than 6 months.

A big factor is the fall of the Loonie from a high of about $1.10 US per Loonie earlier this year to about $0.77 yesterday. For example, fuel surcharges on the ticket went up in Canadian $ terms, despite the "deflation" in crude oil.

No deflation here folks.

I only posted this because it may be a wee foreshadowing of what US citizens can look forward to when their currency finally succumbs to the incredible abuse to which it's being subjected at the hands of its purveyors, the US Treasury and Federal Reserve. Enjoy the interlude while it lasts. In historical terms this so called "deflation" is likely to be fleeting.

[ThePythonicCow]

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

In historical terms this so called "deflation" is likely to be fleeting.

Yup. Too many people showing up. I don't like crowds. I've been mostly in cash and Treasuries and equivalents for a year now.

Getting time to move on.

[MLM]

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

Thanks Lukester. That's the same choirbook I'm singing from.

Anyone who thought their daily account balances weren't going to go haywire in the midst of this, and that even with the best foresight and planning they wouldn't get hurt, has NOT been paying attention.

This is a generational event. It will be full of exogenous politically driven pricing movements. Now is not a time to be trying to make money, it is a time to be trying to protect capital for the opportunities that will present themselves over the next decade (if we don't just all blow each other up).

[mickeyc21]

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

Just a thought:
Everyone could try thinking for themselves after looking at the arguments presented by different people. If you are looking for a financial messiah they are in short supply.
Roubini is 100% correct at present and EJ is likely to be 100% correct at some point in the future.
If you bought gold at $1 000.00 frankly you have only yourself to blame. The signs of bubble hysteria at that point was unmistakable - and not in hindsight: I sold my gold positions even though I believe in its long term relative rise.

[Adeptus]

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

My family and I did quite well with Gold when Argentina collapsed, and we will do the same when U.S., Inc. re-orgs.

Hi Sapiens,
Would you mind elaborating on that (your personal story & your gold), I would be quite interested in reading that story.

Thanks,
Adeptus

[marvenger]

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

Sapiens, would you buy gold through through switzerland bullion vault or would you only hold physical gold in your possession?