Biflation and Ka-Poom theory

[gasull]

I just run across this article on Wikipedia about biflation:

Biflation is the state of an economy where the processes of inflation and deflation occur simultaneously. During this period there is a rise in the purchasing prices of commodity items and a fall in the purchasing prices of non-commodity items.

Isn't the poom phase of ka-poom going to actually be biflation instead of inflation? I mean, will non-commodities and salaries go down?

Maybe EJ already meant it, but my understanding is that EJ says we will have lots of inflation on any kind of items with the exception of real state and stocks.

[cjppjc]

Re: Biflation and Ka-Poom theory

Biflation. I like it. Sounds about right. Maybe a result of Stagflation?

[gasull]

Re: Biflation and Ka-Poom theory

Biflation. I like it. Sounds about right. Maybe a result of Stagflation?

Stagflation happens when you have inflation and economic stagnation. With biflation you have inflation in commodities (raw materials) and deflation in manufactured goods and labor.

EJ seems to think that labor/salaries will rise and manufactured goods too. That's my understanding of the Ka-Poom theory. My gut says that he might be wrong about this point, or maybe I don't get his explanation.

[cjppjc]

Re: Biflation and Ka-Poom theory

Stagflation happens when you have inflation and economic stagnation. With biflation you have inflation in commodities (raw materials) and deflation in manufactured goods and labor.

EJ seems to think that labor/salaries will rise and manufactured goods too. That's my understanding of the Ka-Poom theory. My gut says that he might be wrong about this point, or maybe I don't get his explanation.

Well your gut may may be right or wrong. Biflation seems about right to me. I think if the economy continues to decline, wages with suffer in real and nominal terms.

[Chomsky]

Re: Biflation and Ka-Poom theory

Stagflation happens when you have inflation and economic stagnation. With biflation you have inflation in commodities (raw materials) and deflation in manufactured goods and labor.

EJ seems to think that labor/salaries will rise and manufactured goods too. That's my understanding of the Ka-Poom theory. My gut says that he might be wrong about this point, or maybe I don't get his explanation.

Actually, no.

5. How much worse will it get, and has anyone been able to beat this market?

It happens like this:

• the dollar, declining;
• import prices, rising;
• goods prices, flat to rising;
• wages, falling;
• asset prices (stocks, bonds, real estate), falling;
• long-term interest rates, low but rising;
• short-term interest rates, low but flat to falling.

The probable outcome will be an inflationary recession or an inflationary depression–a toxic and complex mix of asset-price deflation, wage deflation, and energy-price inflation that will have an impact on food prices.

http://harpers.org/archive/2008/10/hbc-90003696

[cjppjc]

Re: Biflation and Ka-Poom theory

Thanks for that Chomsky.

The probable outcome will be an inflationary recession or an inflationary depression–a toxic and complex mix of asset-price deflation, wage deflation, and energy-price inflation that will have an impact on food prices.



Biflation it is.:eek:

[jk]

Re: Biflation and Ka-Poom theory

you might want to check out the thread linked below, where the same issue was discussed

http://www.itulip.com/forums/showthr...hlight=flation

[gasull]

Re: Biflation and Ka-Poom theory

The probable outcome will be an inflationary recession or an inflationary depression–a toxic and complex mix of asset-price deflation, wage deflation, and energy-price inflation that will have an impact on food prices.

Biflation it is.:eek:

Not exactly. EJ says that goods will rise in price. Biflation would mean that goods and wages would deflate.

The only difference between a biflation scenario and the Ka-Poom theory seems to be the inflation/deflation in the price of goods.

If wages go down, won't that impact price of goods, with deflation?

[cjppjc]

Re: Biflation and Ka-Poom theory

Not exactly. EJ says that goods will rise in price. Biflation would mean that goods and wages would deflate.

The only difference between a biflation scenario and the Ka-Poom theory seems to be the inflation/deflation in the price of goods.

If wages go down, won't that impact price of goods, with deflation?

Yes. EJ will turn out to be wrong.

[ThePythonicCow]

Re: Biflation and Ka-Poom theory

Not exactly. EJ says that goods will rise in price.

Speaking from memory (flakey) and iTulip awareness (newbie), my recollection was that EJ predicted imported goods would cost more, but local services and labor less. So if you can find some goods whose price is more determined by local labor than by the price of oil or the price of some competitive import, then that good's price could decline or hold steady.

Once the dollar loses its reserve status, and after the Fed/Treasury/Banksters/Whatevers continue to dilute its value further, then imported energy and goods seems nearly certain to cost us spoiled Americans more (in dollars.)

However we will still have problems with businesses being unprofitable, unemployment being high, and credit and home equity being constrained. Therefore local labor costs will remain weak and most people will have less to spend, both of which keep in check the costs of things that aren't hitched to import price tags.

[ThePythonicCow]

Re: Biflation and Ka-Poom theory

If wages go down, won't that impact price of goods, with deflation?

After a point, lowered wages won't help lower prices. The dollar denominated cost of anything tied to the global market, such as energy or raw materials or component parts will rise. Volume sold will decline. Businesses will have to do the best they can to sell at a profit. Any business that tries to sell below cost and make it up in volume (I've been there :eek will blow up. More businesses will get squeezed between tighter margins and lower volumes,and will also die, usually more quietly.

[gasull]

Re: Biflation and Ka-Poom theory

Speaking from memory (flakey) and iTulip awareness (newbie), my recollection was that EJ predicted imported goods would cost more, but local services and labor less. So if you can find some goods whose price is more determined by local labor than by the price of oil or the price of some competitive import, then that good's price could decline or hold steady.

EJ is 100 times smarter than I am, but I think that even imported goods will cost less as they are overproduced and the demand is falling. They will try to readjust their production to the moving target of a demand that falls deeper and deeper. Once the imported goods are here, they are sold at whatever the price they can be sold. They can't be shipped back to China or elsewhere.

[cjppjc]

Re: Biflation and Ka-Poom theory

EJ is 100 times smarter than I am, but I think that even imported goods will cost less as they are overproduced and the demand is falling. They will try to readjust their production to the moving target of a demand that falls deeper and deeper. Once the imported goods are here, they are sold at whatever the price they can be sold. They can't be shipped back to China or elsewhere.

I may be wrong on this but don't big stores, Wal Mart, Sears, Target, order a year in advance. You find often that these stores will have unbelievable sales on certain items (mostly clothles.) that they have to get rid of. I can see where the stores will ask for less goods at cheaper prices in the future.

[jtabeb]

Re: Biflation and Ka-Poom theory

Stagflation happens when you have inflation and economic stagnation. With biflation you have inflation in commodities (raw materials) and deflation in manufactured goods and labor.

EJ seems to think that labor/salaries will rise and manufactured goods too. That's my understanding of the Ka-Poom theory. My gut says that he might be wrong about this point, or maybe I don't get his explanation.

Biflation is what I thought would happen as a consequence of the economic state that we are in. I called it an inflationary-deflation, only thing I could come up with. Didn't know what to call it untill today.

(I think you have it EXACTLY right)

[metalman]

Re: Biflation and Ka-Poom theory

Not exactly. EJ says that goods will rise in price. Biflation would mean that goods and wages would deflate.

The only difference between a biflation scenario and the Ka-Poom theory seems to be the inflation/deflation in the price of goods.

If wages go down, won't that impact price of goods, with deflation?

wage inflation always follows goods and services price inflation. always. read the research here. heck, read the fed's research.