At least he's setting us a good example... of how to "assume the position", that is.
Posted on 11/18/2009 1:03:24 PM PST by blam
Deflationists Are WRONG, Prepare For The INFLATION Mega-Trend
Economics / Inflation
Nov 18, 2009 - 12:58 AM
By: Nadeem Walayat
The jist of the deflationists argument is that debt deleveraging MUST trigger huge consumer and asset price deflation.
Whilst we have all witnessed huge asset price deflation and some consumer price deflation during 2008 and into 2009.
However we have also witnessed unprecedented government and central bank actions of this year, which have ignited asset price inflation with more to come that is now starting to feed into consumer price inflation.
Why do deflationists have it wrong ?
It is that focusing on the deleveraging of the the debt mountain is a red herring, taken on its own then yes it DOES imply deflation as the debt bubble 'should' contract.
But given the asset price reaction of 2009 that is NOT what is actually taking place! the Debt bubble is NOT deleveraging, the bad debts are being dumped onto the tax payers!
The huge derivatives positions that act as the icebergs under the ocean as compared to the asset price tips that we see above water are not contracting but expanding!
The bankrupt banks have not been allowed to go bankrupt, hence the debt is being systematically transferred to the state which has at its disposal the magic money printing press which can vanish the debt away by means of debt monetization.
Quantitative Easing is not just another ordinary policy measure. I have not been calling it the nuclear option for nothing for it's detonation is tantamount to MONETARY ARMAGEDDON!
THIS IS NOT BEING RECOGNISED by either the mainstream press or the highly vocal deflationists who did catch the deflationary downdraft of 2008 but now having gained press and investor attention are stuck in a perpetual deflationary loop.
The academic economists in the mainstream press, bereft of individual thought have jumped onto the deflationary bandwaggon and applauded money printing as my article of 12 months ago illustrated - Bankrupt Britain Trending Towards Hyper-Inflation?
Perhaps in 12 months time, the flaws in the deflationary arguments will be recognised and again we will witness the re-writing of history where a minor caveat here or there is pulled out of the hat to imply the deflationists were right all along!
The answer is simple in that Monetization of debt feeds inflation and once monetization of debt starts it DOES NOT STOP until the currency is DESTROYED!
The reasons WHY x,y,z should happen are always obvious AFTER the market has moved as to WHY it has moved, the trick here to actually MAKE MONEY is to ACT BEFORE the market MOVES as I warned off back in March 2009 concerning the stocks stealth bull market and the relentless contracting corporate earnings mantra at that time- Stealth Bull Market Follows Stocks Bear Market Bottom at Dow 6,470
Yes I am aware of the on-going corporate earnings contraction forecasts that SUGGEST stocks should be going MUCH lower, though some of the estimates of where the market should be heading to are pretty ridiculous, were talking ridiculous price levels of as low as DJIA 400!
However the stocks bull market was also elevated to Dow 14,000 on the basis of corporate EARNINGS forecasts that suggested that Stocks should go MUCH HIGHER.
So what does that tell you ? It tells you that what you tend to read is always suggestive of the JUNCTURE being FAR AWAY, NOT imminent. IT IS ONLY LONG AFTER THE FACT, AFTER MARKET'S HAVE ALREADY MOVED THAT THE JUNCTURE IS RECOGNISED AND ANALYSIS PRESENTED AS TO WHAT WENT WRONG WITH THE SCENERIO THAT CALLED FOR MUCH LOWER PRICES.
[snip]
As I’ve said before, we may well see what we’ve never seen before.
Deflation of the dollar, of income, of asset value.
Inflation on the cost of necessities.
This guy is forcasting enormous asset (stocks/gold/oil/housing) inflation?
Added UDN to my holdings today.
>> U.S. Inflation Edges Up
How can this be? Hmmm...
Well, the answer is in the body of the article, although not in the headline:
“...the cost of new vehicles rose by the most in more than 28 years... However, widespread price pressures were absent and analysts attributed the rise in vehicle prices to the government’s now expired “cash for clunkers” program, which had depressed auto prices by offering discounts.”
That’d be a double a$$ whooping.
Joe Weisenthal
Nov. 18, 2009, 8:31 AM
Inflation is starting to get hot.
Latest CPI data is up 0.3%. Core was 0.2%, above the 0.1% that analysts were expecting.
Here we go?!
-----
WASHINGTON (AP) — The government says consumer prices edged up slightly faster than expected in October, driven higher by another increase in energy prices and the biggest increase in new car prices in 28 years.
Still, prices are lower than they were a year ago and inflation is expected to remain subdued as the economy struggles to emerge from a deep recession.
The Labor Department said Wednesday that consumer prices rose 0.3 percent in October, a bit more than the 0.2 percent economists had expected. Core inflation, which excludes energy and food, rose 0.2 percent, compared to analysts' expectation for a 0.1 percent rise in core prices.
It would be, but we are headed for unchartered territory.
We are net importers. With a crashing dollar, crude/energy will sky rocket. Luxury items will become unaffordable but to the elite. The rest of us will be buying only essentials because the cost of production and/or shipment will be so high because our enemies are conspiring to make crude more expensive to us.
Meanwhile, we won’t be able to sell the things we own, because everyone’s credit is tapped and unemployment is so high. The ugly truth is that the value of any particular asset is worth exactly what someone can and does pay for it, not a cent more.
Thus, we are reduced to merely surviving. The dollar devalues, which should cause only inflation. But production will also fall off, meaning less supply, which results in deflation. However, those manufacturers that have produced luxury items, will switch to the necessities in order to survive, thus balancing out (just a bit) that imbalance between supply/demand, but not enough to make the necessities so abundant that they are cheap.
We’re in for a royal screwing by a Kenyan Communist. And it is completely intentional.
>> Inflation is starting to get hot.
But, even that article lays the blame on energy + car prices.
Better buy ammo.
At least he's setting us a good example... of how to "assume the position", that is.
I see the authors clearly prefer excessive use of punctuation !#$@%
Not my style and detracts from any interest in reading the article. Might appeal to a 13 year old, however.
Deflation? Inflation? Please explain!
A period of stagflation...followed by inflation (maybe hyperinflation)
Ping!
Thanks JD
“...followed by the Fed raising interest rates to the moon to counter the hyperinflation...followed by a collapse of the stock market...followed by more misery than you can shake a stick at!”
I’m very sad to say that I see this as a high possibility!
No. 1 suggestion decrease your debt soon!
Mel
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