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What Deflation Quacks Like
TMO ^ | 12-7-2015 | Raul_I_Meijer

Posted on 12/07/2015 10:25:37 AM PST by blam

Dec 07, 2015
Raul_I_Meijer

As yet another day of headlines shows, see the links and details in today’s Debt Rattle at the Automatic Earth, deflation is visible everywhere, from a 98% drop in EM debt issuance to junk bonds reporting the first loss since 2008 to corporate bonds downgrades to plummeting cattle prices in Kansas to China’s falling demand for iron ore and a whole list of other commodities.

The list is endless. It is absolutely everywhere. And it’s there every single day. But how would we know? After all, we’re being told incessantly that deflation equals falling consumer prices. And since these don’t fall -yet-, other than at the pump (something people seem to think is some freak accident), every Tom and Dick and Harry concludes there is no deflation.

But if you wait for consumer prices to fall to recognize deflationary forces, you’ll be way behind the curve. Always. Consumer prices won’t drop until we’re -very- well into deflation, and they will do so only at the moment when nary a soul can afford them anymore even at their new low levels.

The money supply, however it’s measured, may be soaring (Ambrose Evans-Pritchard makes the point every other day), but that makes no difference when spending falls as much as it does. And it does. The whole shebang is maxed out. And the whole caboodle is maxed out too. All of it except for central banks and other money printers.

Everyone has so much debt that spending can only come from borrowing more. Until it can’t. We read comments that tell us the global markets are reaching the end of the ‘credit cycle’, but can the insanity that has ‘saved’ the economy over the past 7 years truly be seen as a ‘cycle’

(snip)

(Excerpt) Read more at marketoracle.co.uk ...


TOPICS: News/Current Events
KEYWORDS: deflation; drbt; eonomy; investing
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1 posted on 12/07/2015 10:25:38 AM PST by blam
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To: blam

Brace yourself for the wave of posters who will tell you how expensive milk has gotten.


2 posted on 12/07/2015 10:28:10 AM PST by babble-on
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To: blam

Yada yada yada. Having experienced Jimmy Carter’s stagflation, deflation seems benign. Granted, living
on a fixed income is harder with zero interest rates,
but not as crippling as soaring prices.


3 posted on 12/07/2015 10:32:17 AM PST by sparklite2 (Islam = all bathwater, no baby.)
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To: babble-on

Doctor Copper

4 posted on 12/07/2015 10:33:26 AM PST by blam (Jeff Sessions For President)
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To: babble-on

I take it you don’t get out to the grocery store much... I believe my eyes, checking account and grocery bill more than I believe this cats numbers and postulations. There may indeed be deflation but it is not happening at the grocery store.


5 posted on 12/07/2015 10:33:48 AM PST by sarge83
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Tis The Season
To End The FReepathon


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6 posted on 12/07/2015 10:49:02 AM PST by DJ MacWoW (The Fed Gov is not one ring to rule them all)
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To: sarge83

I have been around for Inflation, Deflation and Stagflation. Now how about some just plain ordinary every day...”Flation?”


7 posted on 12/07/2015 10:51:14 AM PST by Don Corleone ("Oil the gun..eat the cannoli. Take it to the Mattress.")
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To: blam

“The whole shebang is maxed out. And the whole caboodle is maxed out too. All of it except for central banks and other money printers.”

So, get off of FR and get back to work, SERFS! 0bama needs your tax dollars to make ends meet.

Well, it’s pretty likely that our ‘ends’ WILL never ‘meet’ again with close to 20 TRILLION in debt, but still!


8 posted on 12/07/2015 11:01:36 AM PST by Diana in Wisconsin (I don't have 'Hobbies.' I'm developing a robust Post-Apocalyptic skill set...)
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To: sarge83

Actually, I think it’s starting. Yesterday, cooking oil (canola) was $4.98/gallon. It’s been $7+/- for years. There was no big screaming SPECIAL tag, either. My local grocery sent out their weekly flier and all portioned meat is close to the usual full muscle cut per pound...maybe a 15% price drop for beef, as well as pork. Eggs came down again a few weeks ago. If you shop carefully, some stores have bacon at just over $2.00/lb and butter at well under $2.50/lb.

Then for non-food items: I use lavender oil in the kitchen for burns and here and there for aroma/air freshening. For a couple of years, the best price was around $10 for 10ml (1/2 oz). I have Prime, so yesterday, I was searching Amazon for some lavender oil and supplier after supplier was offering 4 full oz, no fillers, good quality with good reviews for just under $14+free shipping. This was strange, because candles scented with lavender are hard to find, the larger sizes are more expensive, most manufacturers are selling blends.

We are listing our property this spring and I have been watching prices in my area fall. The realtor comes this week to start the process and we have decided to start off asking a lower price, because the down-sized properties we have been looking at have all dropped, some considerably.

And of course, everyone is aware of the drops in silver and gold.

Now, these are wildly different assets and commodities,but I’m starting to see price drops scattered everywhere. I should add that I have expected deflation for years. Oh, and the other side of the equation: we are self-employed, hand-manufactured goods and personal services, totally discretionary. Business has been terrible to flat for the past seven years and we are starting to see an uptick. We think this means people have more disposable income. YMMV

By, the way: for shippable food items, like coffee, for an example, if you have Amazon Prime, you can save a lot ordering online. The coffee I like, Sumatra, is either way up (50%) or not available in my local stores. I can get it online, 2 days free ship, good quality for $3 (20%) or so below the best store price. Besides the streaming TV shows, I think I’ve already saved the entire cost of my membership within a couple of months. Caveat: I took advantage of their anniversary offer and added in $5 in Amazon points, so I paid $60 or so for membership.I’m at the point of always checking Amazon before I buy anything.

Straight-line extrapolations don’t go forever, in either direction. And items do disappear when the prices exceed what the market will bear. So, waiting for more and more price cuts may take a long time, during which other items may increase. It’s fluid.


9 posted on 12/07/2015 11:02:41 AM PST by reformedliberal
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To: sarge83

Amen! Not only are prices going up but packages are getting smaller!


10 posted on 12/07/2015 11:15:19 AM PST by erkelly
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To: blam; AdmSmith; AnonymousConservative; Berosus; bigheadfred; Bockscar; cardinal4; ColdOne; ...
Thanks blam. Crude prices have led the way down, but not everything comes down as quickly, irrespective of the quirks of each commodity. That includes gasoline. Of course, as long as there's someone to scapegoat for it, everyone is happy being miserable.

11 posted on 12/07/2015 11:20:38 AM PST by SunkenCiv (Here's to the day the forensics people scrape what's left of Putin off the ceiling of his limo.)
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To: Don Corleone

I have been down the inflation and stagflation road before with the former worst president in US history. Now we just have a total mess. How can you believe anything the US government publishes. Their numbers just don’t add up to reality.


12 posted on 12/07/2015 12:06:29 PM PST by sarge83
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To: SunkenCiv; blam
Deflation sets the real price of goods to my mind, I flunked economics.
13 posted on 12/07/2015 12:09:19 PM PST by Little Bill (EVICT Queen Jean)
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To: blam
Everyone has so much debt that spending can only come from borrowing more...

That's crazy.  On average American individual real wealth is at an all time high.  He's right that we got deflation and the reason is nobody's spending (money supply's up, velocity's down), but the average American is definitely not in the red.

14 posted on 12/07/2015 12:16:37 PM PST by expat_panama
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To: sparklite2
Having experienced Jimmy Carter’s stagflation, deflation seems benign.

Those that went thru FDR's deflation would not want to use the word 'benign'.  Yeah, inflation's not as good as stable prices but ten percent deflation's a lot worse than ten percent inflation.

15 posted on 12/07/2015 12:27:29 PM PST by expat_panama
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To: expat_panama

Compared to Carter’s inflation, what we have now is benign.
Maybe I didn’t state it well enough the first time.


16 posted on 12/07/2015 12:32:23 PM PST by sparklite2 (Islam = all bathwater, no baby.)
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To: erkelly
"Not only are prices going up but packages are getting smaller!"


17 posted on 12/07/2015 12:36:00 PM PST by sparklite2 (Islam = all bathwater, no baby.)
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To: Little Bill
The market sets the price. :') Sellers sometimes sell stuff at a loss because they risk losing even more by holding on to inventory. If the necessary losses are going to crater the business, they either live off savings until the crisis passes, or they go out of business, or sell the whole thing (sometimes it depends how close they are to retirement). Somewhere I've got PJ O'Rourke's book (audio version) about Adam Smith's "Wealth of Nations", and highly recommend that; Smith tried to work up an explanation for price, but ultimately price is what a buyer is willing to pay when the seller is willing to part with it.

18 posted on 12/07/2015 12:54:40 PM PST by SunkenCiv (Here's to the day the forensics people scrape what's left of Putin off the ceiling of his limo.)
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To: SunkenCiv
... but ultimately price is what a buyer is willing to pay when the seller is willing to part with it.

Right out of the Austrian school. Love it. I phrased it wrong, the value of money defines the cost of goods, in a way, the product must reflect value that the Billions of buyers attach to it, if it does not the product fails in the market. The value of goods and services determine the value of money as judged by the buyer.

19 posted on 12/07/2015 2:09:19 PM PST by Little Bill (EVICT Queen Jean)
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To: expat_panama
"Those that went thru FDR's deflation would not want to use the word 'benign'. "

My dad said no one had any money then.

20 posted on 12/07/2015 2:17:50 PM PST by blam (Jeff Sessions For President)
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