Biflation and Ka-Poom theory

[ThePythonicCow]

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.

But those imported goods are paid for with dollars, which are also overproduced, and the demand for which will be falling, once we get past what amounts to a massive short covering rally in dollars known hereabouts as "Ka".

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.

Again -- it's the Texas two step (as with dollars in my previous sentence.) The imported goods sitting on the shipping docks are already here and depressing prices. But longer term, the demand collapse in America is causing a production capacity collapse overseas.

There is not a corresponding collapse in the production of American Dollars however. Quite the contrary. Eventually, the increased supply of dollars encounters the decreased supply of natural resources and manufactured goods. Then we get to the "POOM".

[gasull]

Re: Biflation and Ka-Poom theory

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

Thanks Metalman. I've only skimmed it, but it seems to talk only about the way up: price inflation causing wage inflation. What about the way down? Does price deflation causes wage deflation, or is it the other way around?

I think price deflation and wage deflation reinforce each other, as the graph here shows:

http://www.mint.com/blog/finance-cor...-to-deflation/

[gasull]

Re: Biflation and Ka-Poom theory

But those imported goods are paid for with dollars, which are also overproduced, and the demand for which will be falling, once we get past what amounts to a massive short covering rally in dollars known hereabouts as "Ka".

PythonicCow, maybe this is the part that I don't get. Last time I checked those overproduced dollars were thrown at the FIRE economy in the form of bailouts. I don't see how these trillions of dollars will reach Main Street any time soon.

Actually, if most of this money is going to banks paying back to other banks, then it's actually credit, not money, and it's disappearing in the moment the credit is paid back. I don't see how this can be inflationary. Please explain it to me.

[ThePythonicCow]

Re: Biflation and Ka-Poom theory

PythonicCow, maybe this is the part that I don't get. Last time I checked those overproduced dollars were thrown at the FIRE economy in the form of bailouts. I don't see how these trillions of dollars will reach Main Street any time soon.

Actually, if most of this money is going to banks paying back to other banks, then it's actually credit, not money, and it's disappearing in the moment the credit is paid back. I don't see how this can be inflationary. Please explain it to me.

Presently, it's not inflationary in the large. As you note, except for isolated pockets (this month, it seems to be the big banks), the money is being Hoovered up faster than it can be printed.

We're trying to keep the Hindenberg aloft by pumping hydrogen gas into it faster than its burning. The balloon still falls, spastically. At some point the balloon collapses in a pile of burnt carbon and the air is filled with unspent hydrogen, lacking enough oxygen to substain life or fire. Already the oxygen producing plants (foreign factories and mines) below are getting fried. The native American landscape is already a "vast wasteland" (Newton Minow's term for TV programming), partially denuded of its once great industrial and mining capacities.

Perhaps I should add an oxygen tank to my stash of whiskey, ammo, gold, rice, beans and toilet paper :rolleyes::eek:.

Look about you for those forms of commerce which largely escaped the Great Financial Debt Paper and Asset Inflation Bubble. These will be the anerobic plants that best survive this Grand Crash. Those, and grand Tyrannies. Tyrannical governments seem to flourish in times like these, or at least seem to make life more treacherous for the rest of us.

[we_are_toast]

Re: Biflation and Ka-Poom theory

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

I'm not sure I buy this. The paper claims that wages follow inflation rather than lead inflation. They make a very good case and I'm inclined to believe this. But this depression is not similar to any of their data points.

As FRED has said many times, this is not your typical FED induced recession. This depression isn't even like the depression of the 30's. The globalization of labor isn't accurately reflected in their numbers. An historic wage chart seems to show a steady increase in wages with only minor changes in inflationary periods. And Yet I'm having a hard time logically accepting that there will be upward pressure on wages at a time when unemployment is the highest it's been in 70 years, cheap labor can be found around the world, and company profit margins are being squeezed by rising material costs and poor sales. IMHO.

[thedanimal]

Re: Biflation and Ka-Poom theory

I'm not sure I buy this. The paper claims that wages follow inflation rather than lead inflation. They make a very good case and I'm inclined to believe this. But this depression is not similar to any of their data points.

As FRED has said many times, this is not your typical FED induced recession. This depression isn't even like the depression of the 30's. The globalization of labor isn't accurately reflected in their numbers. An historic wage chart seems to show a steady increase in wages with only minor changes in inflationary periods. And Yet I'm having a hard time logically accepting that there will be upward pressure on wages at a time when unemployment is the highest it's been in 70 years, cheap labor can be found around the world, and company profit margins are being squeezed by rising material costs and poor sales. IMHO.

Well said. I think we have to be particularly careful in looking to past data points in our current situation given its inherent novelty in the context of the global position of the dollar, the global economy, and the combined pressures of the current collapse.