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Deflation ?
Old 09-07-2006, 11:21 PM   #1
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Deflation ?

What are the odds ?

Boomers Could Soon Feed Deflation



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Re: Deflation ?
Old 09-07-2006, 11:42 PM   #2
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Re: Deflation ?

Better than even I think.
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Re: Deflation ?
Old 09-07-2006, 11:52 PM   #3
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Re: Deflation ?

"What if," Mr. Ingram asked, "housing, autos and gasoline all get cheaper? What will housing retreating by 10 to 20 percent and gasoline falling off 26 percent do to inflation?"

The price of houses isn't reflected in the CPI (just rents and owner-equivalent rent).

Cars have been cheap for at least 5 years now.

Gas prices always drop after the summer, and this often causes the CPI to drop in the second half of the year.

Generally, the biggest deflationary risk is overproduction / overcapacity.* *That was a factor in 2000, which is why Greenspan starting easing, but it doesn't seem to be a factor now.

My guess is that we'll see less consumer spending due to the housing bubble pop, which will slow inflation and the economy, but not to the point of deflation.
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Re: Deflation ?
Old 09-08-2006, 08:41 AM   #4
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Re: Deflation ?

ROTFLMAO ... I said same here a few months ago and was soundly beaten up for it. How dare I say that anything but inflation reigns? The victors then went around pounding each other on the back and congradulating themselves over beer ... This does tend to be a rather conformist group, it seems to me.

At any rate, this time I'll keep my data and conclusion to myself, but you'd have to be a blind pig ...
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Re: Deflation ?
Old 09-08-2006, 09:01 AM   #5
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Re: Deflation ?

Nuts. The drivers of inflation are increasingly not from the US economy but from our overseas competitors for commodities, labor etc. (i.e. India, China and so on). I think that's why the Fed will be hard-pressed to control inflation: they can raise rates all they like, but unless China succeeds in reining in its expansion, it won't mean squat.
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Re: Deflation ?
Old 09-08-2006, 09:28 AM   #6
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Re: Deflation ?

Please - don't you know that China is busily exporting deflation? There was a brief time a year or so ago where they did same for inflation, which some suspect is the cause of the present inflation ballyhoo (which is part of it, the other parts are probably we had a new Fed chief so inflation expectations went up since easy Al isn't around anymore, effects of War on Terror spending, easy liquidity, and lots and lots of speculation due to all of the above).

The rest of the world is hardly in competetion with us, they depend on us. So China is busy buying lots of copper - for what? So the peasants can have indoor plumbing? Watch what happens in China and India as housing tanks here.

Well I should have learned my lesson, invest as you will.

Quote:
Originally Posted by brewer12345
Nuts. The drivers of inflation are increasingly not from the US economy but from our overseas competitors for commodities, labor etc. (i.e. India, China and so on). I think that's why the Fed will be hard-pressed to control inflation: they can raise rates all they like, but unless China succeeds in reining in its expansion, it won't mean squat.
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Re: Deflation ?
Old 09-08-2006, 09:35 AM   #7
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Re: Deflation ?

Quote:
Originally Posted by danm

ROTFLMAO ... I said same here a few months ago and was soundly beaten up for it. How dare I say that anything but inflation reigns? The victors then went around pounding each other on the back and congradulating themselves over beer ... This does tend to be a rather conformist group, it seems to me.

At any rate, this time I'll keep my data and conclusion to myself, but you'd have to be a blind pig ...

I'm new here.

Please share the data and your conclusions.






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Re: Deflation ?
Old 09-08-2006, 10:01 AM   #8
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Re: Deflation ?

Quote:
Originally Posted by danm
Please - don't you know that China is busily exporting deflation?
You wouldn't actually have any, um, proof or evidence supporting that position, would you? When I see the price of everything spiralling upward as China builds infrastructure and climbs the development scale (with India not far behind), I get a little skeptical that China is actually pushing us towards deflation.
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Re: Deflation ?
Old 09-08-2006, 10:34 AM   #9
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Re: Deflation ?

The baby-boomers fueled inflation...
but the baby-boomers are aging.

The median age of the planet is increasing...
even in third world nations... but especially
in first world nations. The aging demographics
alone will eventually bring about world-wide
deflation.


http://www.un.org/NewLinks/older/99/table1.jpg

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Re: Deflation ?
Old 09-08-2006, 10:45 AM   #10
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Re: Deflation ?

I expect you to roast me for saying this, but I'm not going to go through the data and discussion here. It's far too much material, and I'm not willing to give out free economic macroeconomic education anymore. Instead I'll offer some pointers, and you can draw your own conclusions.

o For a primer, study Gary Shillings books, and subscribe to his newsletter for a monthly view of the economic climate (www.agaryshilling.com) The newsletter is rather important, but it does cost money.

o Read what Mish has to say at http://globaleconomicanalysis.blogspot.com

o Read up on what Roubini has to say http://www.rgemonitor.com/blog/roubini/

o And read what our good John Mauldin has to say (the past year say) http://www.2000wave.com/gateway.htm

In particular I recommend contemplating historical economics (available from Shilling (INSIGHT 2004-present and the two books)), with a dash of demographic study, and a large dose of common sense, and simply looking around you at the actually happening in front of you (hint, look at durable goods (autos, fridges, water heaters and such), and airlines for starters). In the meantime, try to distance yourself from the consensus babble.

If nothing else, you will learn a lot of interesting and useful information.

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Re: Deflation ?
Old 09-08-2006, 10:50 AM   #11
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Re: Deflation ?

I have read/listened to all of those authors and while they do a good job as far as it goes, I mostly don't find them all that consvincing. You really think aggregate demand will drop? As people age and population growth slows, people and nations tend to become more wealthy on a per capita and aggregate basis. As people become more wealthy, they tend to consume more. Now, what they consume may change (more healthcare and electricity, fewer refrigerators and cars), but overall demand is hghly unlikely to slack off any time soon.
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Re: Deflation ?
Old 09-08-2006, 11:02 AM   #12
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Re: Deflation ?

Sounds like an argument I heard why housing will go up forever.

Aggregate demand doesn't have to drop, no siree.
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Re: Deflation ?
Old 09-08-2006, 11:20 AM   #13
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Re: Deflation ?

Quote:
Originally Posted by danm
Sounds like an argument I heard why housing will go up forever.

Aggregate demand doesn't have to drop, no siree.
OK, you are proposing a global depression?

Time to get out the tinfoil hats, boys and girls.
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Re: Deflation ?
Old 09-08-2006, 11:31 AM   #14
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Re: Deflation ?

China export inflation and deflation?
What a magic answer to all the problem.

Things changed sine middle 1990s. Traditional theory failed because it could not factor in the China piece.

In the globalization, only two benifit, America and China. What a couple.
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Re: Deflation ?
Old 09-08-2006, 12:08 PM   #15
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Re: Deflation ?

Quote:
Originally Posted by Helena
The baby-boomers fueled inflation...
but the baby-boomers are aging.

The aging demographics
alone will eventually bring about world-wide
deflation.
Not necessarily. Demand for some things will drop, for others, increase. And remember, demand is only half of the story. Think about supply of goods and services. Boomers not only were (and are) prodigious consumers, but they also are and were prodigious producers.

There have been well educated, persuasive deflationists ever since I started paying attention to business 35 years ago. I remember John Exter, who had been an executive at the forerunner of Citibank. He explained in about 1972 why deflation had to happen. Now the fact that it didn't doesn't prove that it won't now, but to me it seems a long shot, especially given the fact that Mr. Bernanke has spent his life studying the errors that he thinks were made during the last US deflation, 75 years ago. He may look like Dopey the Dwarf, but I doubt he would leave any tactic off the table if the US were threatened, or he even thought it was threatened by deflation.

Does anyone know of any time in any large country where an enduring war caused deflation? There was a short deflation in the US after WW1, I donít know about the other countries. WW1 was largely a money maker, rather than a money sink for the US-we came out of it with our treasury stuffed with gold and foreign obligations. Donít think that will be the outcome of The War Against Terror.

Warren Buffet says democracy and inflation are joined at the hip, and I think that over any reasonable period of time this will be true. Of course, any one speculating can get wiped out even in a short fast break.

Ha

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Re: Deflation ?
Old 09-08-2006, 12:12 PM   #16
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Re: Deflation ?

No, but interesting conclusion. Deflation = global depression = therefore you are a nut job.

I think that it does show that you didn't study the subject as well as perhaps you think you did. It seems to me that, regardless of our individual investing beliefs (say that we are headed for hyperinflation), that all forms of inflation should be deeply studied. Inflation, disinflation, deflation, reflation, and hyperinflation (hyperdeflation (Great Depression) too, but I haven't heard the term used before). How do you know that one is occuring, unless you can see that the opposite is not? Or what flavor we are likely to be enjoying?

That's OK, I'm not trying to change your mind.


Quote:
Originally Posted by brewer12345
OK, you are proposing a global depression?

Time to get out the tinfoil hats, boys and girls.
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Re: Deflation ?
Old 09-08-2006, 12:15 PM   #17
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Re: Deflation ?

Quote:
Originally Posted by danm
No,* but interesting conclusion. Deflation = global depression = therefore you are a nut job.*

I think that it does show that you didn't study the subject as well as perhaps you think you did. It seems to me that, regardless of our individual investing beliefs (say that we are headed for hyperinflation), that all forms of inflation should be deeply studied. Inflation, disinflation, deflation, reflation, and hyperinflation (hyperdeflation (Great Depression) too, but I haven't heard the term used before).* How do you know that one is occuring, unless you can see that the opposite is not? Or what flavor we are likely to be enjoying?

That's OK, I'm not trying to change your mind.
I doubt you would change my mind, but i still am interested in hearing your argument for deflation. All I have gotten thus far is a vague wave at other people's work, most of which I find erudite, but unconvincing.

And yes, I've studied episodes of inflation, deflation, etc. that you very much. I'm open to debate, but you have to at least put forth an intelligible argument. Otherwise I am ready to conclude that you are a member of the tinfoil hat society (very popular these days).
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Re: Deflation ?
Old 09-08-2006, 12:22 PM   #18
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Re: Deflation ?

I would like to hear this debate. I don't find either side's argument very convincing yet.

Frankly, I don't care too much because I'm sure that no matter what happens, it will be Clinton's fault. But please discuss.
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Re: Deflation ?
Old 09-08-2006, 12:26 PM   #19
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Re: Deflation ?

Hi Ha,

Quote:
Originally Posted by HaHa
Warren Buffet says democracy and inflation are joined at the hip, and I think that over any reasonable period of time this will be true.
Buffet was the right investor born at the right time, but he obviously didn't study US economic history. The U.S. democracy has reguarly enjoyed periods of deflation, always after tech booms (railroads and canals for example) .

Brewer,
Your taunting me into a discussion I don't want to spend my time on. But still, let me turn it back on you then, can you tell me, why did the housing bubble happen? Surely you've seen Shillers chart, we haven't seen anything at all like this going back to 1890 or so. Why?

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Re: Deflation ?
Old 09-08-2006, 12:29 PM   #20
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Re: Deflation ?

Quote:
Originally Posted by danm
Brewer,
* * *Your taunting me into a discussion I don't want to spend my time on. But still, let me turn it back on you then, can you tell me, why did the housing bubble happen? Surely you've seen Shillers chart, we haven't seen anything at all like this going back to 1890 or so. Why?
If you aren't interested in this discussion, why do you keep posting on this thread?

I think we had a housing bubble because the Fed flooded the US with unprecedented amounts of liquidity. This meant that money became very cheap and also encouraged stupid risk taking because spreads became vanishingly thin. So what?
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