Deflation

[brewer12345]

My Gawd, that blog is so egregiously ill-informed/just plain wrong it boggles the mind.

[danm]

I wouldn't spend much time with the Elliot Wave guys, I haven't found them to be a good source of information in general.

But studying deflation is a good idea - in fact we're 'enjoying' a large bout of it right now. When people think of deflation they usually only think of the Great Depression. But the US, prior to that, regularly experienced mild deflation of 1-2%, which as Gary Shilling points out also coincided with GDP growth. Read his books to see the historical evidence.

Shilling posits that during the post war period we haven't seen deflation, good (of excess supply - mild) or bad (of deficient demand - Great Depression) due to a few factors, but mainly war. We've been on a war footing - with attendant overspending, which caused an unusually long inflationary period (the govt overspends on tin, for bombs and tanks and such, which is not balanced in the consumer arena, since the material is blown up or otherwise thrown away in the war effort).

At any rate we are experiencing deflation right now. Deflation goes beyond generalized price deflation. Housing is in massive deflation (1T so far in paper losses?), credit is in massive deflation (early estimates of 500B, with leverage equalling a few trillions), and many other industries are experiencing it too (airlines, autos, furniture, etc.)

We're not at generalized price deflation, but with retiring baby boomers who generally haven't funded their retirements, and with a world of excess production, many think that there's a good chance we'll see it. The Fed will fight it tooth and nail, but it may be pushing on a string (why take out a loan for a new car, even at 0%, when you don't want a new car?)

Commodity prices can as well be due to speculation, as supply.

Otherwise my deflation hedges earned me 20% last year. If I was more aggressive I would have earned, as others I know did, 600%

[Helena]

Any comments on this Fed graph posted on Market Ticker ?

[cute fuzzy bunny]

Quote:

Originally Posted by twaddle I bet some people know the difference between attacking an idea/opinion vs attacking the person.

I'm a little confused about which one you prefer.

Is it dismissing out-of-mainstream ideas thats bad? I see here someone who was upset about a dismissal last week, yet is now doing the dismissing.

Is it attacking someone who dismisses the out of mainstream ideas or attacking the person who questions the dismissal? I see here someone attacking a poster who is questioning the dismissing, yet that person was complaining about this behavior just last week.

Just so I can get my dance card straight, are we all supposed to welcome any and all ideas and debate them thoroughly and afresh without any dismissal or attacks, or are we supposed to randomly break into groups where one group dismisses the ideas we've already discussed before, while the second group attacks the first? Then the following week we switch?

Wow...the irony is so thick you could walk on it.

Quote:

Originally Posted by haha Almost no one expects Martians to land warships on the White House lawn either.

No one expects the Spanish Inquisition!!!

[barbarus]

Someone on another site expressed the situation in a simplistic but useful phrase.

We are going to experience INflation in the things we need (read: food, energy, etc.) and DEflation in the things we want.

It probably comes down to a matter of simple, enduing faith.
Their going to figure out how to give us the worst elements of any economic outcome. We can't see how they do it currently, but it's going to happen.

A deflation with a declining standard of living, but increasing prices.

An inflation with skyrocketing prices, but stagnant opportunities.

[Marquette]

Granted, I wasn't old enough to have lived through it, but didn't we go through the same thing in the 1970's?

[haha]

Quote:

Originally Posted by Marquette Granted, I wasn't old enough to have lived through it, but didn't we go through the same thing in the 1970's?

An interesting thing about the 70s is that the real economy, as proxied by corporate profits and dividend growth, was very strong. There was unemployment however.

Right now a big part of the real economy, housing, is in trouble.

Ha

[Lsbcal]

Seems to me there are some referring to deflation when they actually mean disinflation (see Disinflation - Wikipedia, the free encyclopedia). Also note the Dec CPI was +0.3% and for 12 months it was +4.1%.

[barbarus]

It is said that a house is now the major factor in most people's sense of financial well-being, even to the point of being more important than having a j*b.

If true, the collapse of the housing bubble is obviously going to devastate the economy when J6P wakes up to what his house is now worth. Perhaps he'll slumber on though, until good times return a few years down the road.