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Get Ready For 'Stag-Deflation'
Old 10-31-2008, 04:44 PM   #1
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Get Ready For 'Stag-Deflation'

If you can;
Hold off on purchases - prices to come down; businesses going out of business.
Short term bonds up
Commodities down - buy low
Dollar stronger next year - buy FX then

I'm guessing; stock prices up at end of year/Jan and then down again - my guess is that we have seen the lows but might retest.


Get Ready For 'Stag-Deflation' - Forbes.com

In conclusion, a sharp slack in goods, labor and commodity markets will lead to global deflationary trends over the next year. And the fiscal costs of bailing out borrowers and/or lenders/investors will not be inflationary, as central banks will not be willing to incur the costs of very high inflation as a way to reduce the real value of the debt burdens of governments and distressed borrowers. The costs of rising expected inflation will be much higher than the benefits of using the inflation tax to pay for the fiscal costs of cleaning up the mess that this most severe financial crisis has created.
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Old 10-31-2008, 07:06 PM   #2
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Thanks for the article. Inflation has been on my mind quite a bit recently. As a creditor, from a purely economic standpoint deflation is wonderful for me. The folks who I've loaned money to will have to pay me back in dollars with increased purchasing power. The key is to make sure that our economic situation doesn't deteriorate to the point that they default on their loans instead. So far, it appears that this will be the case, but the situation bears watching.

I'll believe that we're truly in a deflationary mode when food prices start falling. This has never happened since I've been a consumer. Fuel and commodity prices have collapsed - when will this starting filtering through to the cost of bananas, for example ($0.49/lb not so long ago; $0.69/lb today)?
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Old 10-31-2008, 07:26 PM   #3
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Assuming that Nouriel Roubini is correct, what does this mean for equities? Somebody correct me if I'm wrong, but don't stocks suffer during deflationary periods? If I was convinced that we were going to experience a deflationary environment for the next five years, I'd be tempted to just lock everything up in a 5-year cd at 5 percent (still doable) and forget the market until better times return.
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Old 10-31-2008, 08:01 PM   #4
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Governments know how to cure deflation, AND they have printing presses.
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Old 10-31-2008, 08:07 PM   #5
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If I was convinced that we were going to experience a deflationary environment for the next five years, I'd be tempted to just lock everything up in a 5-year cd at 5 percent (still doable) and forget the market until better times return.
That would indeed be the best move...

But what the heck is "stag-deflation"? I understand stagflation, a rare paradoxal mixture of recession and inflation. But recession and deflation are not so paradoxal. Why can't he call it a deflationary recession like everyone else?
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Old 10-31-2008, 09:30 PM   #6
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That would indeed be the best move...

But what the heck is "stag-deflation"? I understand stagflation, a rare paradoxal mixture of recession and inflation. But recession and deflation are not so paradoxal. Why can't he call it a deflationary recession like everyone else?
Only guys are invited to the party?
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Old 11-01-2008, 12:18 AM   #7
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Only guys are invited to the party?
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Old 11-02-2008, 02:51 PM   #8
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Only guys are invited to the party?
And they watch videos of Janet Reno (that's the deflation part).
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Old 11-03-2008, 08:47 AM   #9
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And they watch videos of Janet Reno (that's the deflation part).
Priceless!

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Old 11-04-2008, 09:42 AM   #10
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There are already words for "stag-deflation." Think "deep recession" or even the D-word. We don't need to coin a cute new term for it.
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Old 11-04-2008, 12:33 PM   #11
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There are already words for "stag-deflation." Think "deep recession" or even the D-word. We don't need to coin a cute new term for it.
Don't worry. Consumer price deflation will be mild and short.

Inflation is the way of the world since WW2.

Ha
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Old 11-04-2008, 01:29 PM   #12
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Fuel and commodity prices have collapsed - when will this starting filtering through to the cost of bananas, for example ($0.49/lb not so long ago; $0.69/lb today)?
Socca, it's interesting that you used this example. According to this month's National Geographic, there's a fungus that's killing banana plants all over the world. Here's a link to a Scientific American podcast transcript about it:

Can Science Save the Banana?: Scientific American Podcast

Just thought it was interesting.

As far as when lower prices will start filtering through to the cost of food in general -- probably at the end of the production cycle in which lower-priced fuel and commodities are used. So we may not see cheaper grain or vegetables until next summer's growing season is done. (With the exception of stuff grown year-round in Texas, Florida and California).
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Old 11-04-2008, 08:42 PM   #13
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Banana death: not the first time it's happened. Nearly a century ago, the same thing happened, and the banana industry had to move to a new species (variety?). If you've traveled a lot, you know there are many kinds of bananas of different size and variety. What you buy in the USA is a very standardized product. There are many who decry the loss of variety and species of food plants ... because things like the banana fungus come along.
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Old 11-06-2008, 07:24 PM   #14
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I heard that guy talk about bananas on the radio. Interesting facts (IIRC):

The old species of banana that died out was much better tasting than the current one.

All the bananas you get in this country are genetically identical.

There are many species of banana, but the one we get is the only one that can be shipped effectively.

The original Chicita banana song said to never store the banana in the refrigerator. Putting bananas in the fridge makes them last longer -- that's why the company didn't want you to do that.

Enjoy your bananas now, because there may be none in ten years.
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Old 11-06-2008, 07:48 PM   #15
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This thread sure has gone bananas
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Old 11-06-2008, 08:05 PM   #16
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Anything to keep our mind off our brokerage account balance.

Please, somebody feeds us more bananas...
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Old 11-06-2008, 08:12 PM   #17
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In North America, we used to have wheat rust (wheat stem rust, leaf rust) epiphytotics every decade or so. These fungal diseases used to wipe out large portions of the wheat crop. The commercially-grown wheat now has very good (e.g triple-redundant) resistance to these fungi, and they are no longer a big problem (provided we stay ahead of their mutations).

I don't know much about the banana breeding biz, but I'm sure somebody is working to develop a variety with resistance that also has the other commercially valuable components (high sugar content, predictable ripening, etc)
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Old 11-06-2008, 08:50 PM   #18
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Electrical banana
Is gonna be a sudden craze.
Electrical banana
Is bound to be the very next phase.

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They call me Mellow Yellow,
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They call me Mellow Yellow.


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Old 11-06-2008, 08:57 PM   #19
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Day-O, Day-ay-ay-O
Daylight come and I want t' go home...

Call Mr. Tally-Man
Tally the banana
Daylight come and I want to go home...
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Old 11-09-2008, 09:11 AM   #20
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Jack, Jack, bo-back,
Banana-fana fo-fack
Fee-fi-mo-mack
Jack!
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