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The Deflation Monster Has Arrived
Zero Hedge ^ | 16 Jan 16 | Tyler Durden

Posted on 01/16/2016 10:19:48 AM PST by SkyPilot

As we’ve been warning for quite a while (too long for my taste): the world’s grand experiment with debt has come to an end. And it’s now unraveling.

Just in the two weeks since the start of 2016, the US equity markets are down almost 10%. Their worst start to the year in history. Many other markets across the world are suffering worse.

If you watched stock prices today, you likely had flashbacks to the financial crisis of 2008. At one point the Dow was down over 500 points, the S&P cracked below key support at 1,900, and the price of oil dropped below $30/barrel. Scared investors are wondering: What the heck is happening? Many are also fearfully asking: Are we re-entering another crisis?

Sadly, we think so. While there may be a market rescue that provide some relief in the near term, looking at the next few years, we will experience this as a time of unprecedented financial market turmoil, political upheaval and social unrest. The losses will be staggering. Markets are going to crash, wealth will be transferred from the unwary to the well-connected, and life for most people will get harder as measured against the recent past.

It’s nothing personal; it’s just math. This is simply the way things go when a prolonged series of very bad decisions have been made. Not by you or me, mind you. Most of the bad decisions that will haunt our future were made by the Federal Reserve in its ridiculous attempts to sustain the unsustainable.


(Excerpt) Read more at zerohedge.com ...


TOPICS: Business/Economy; Extended News; Government; News/Current Events
KEYWORDS: debt; deflation; depression; economy; fed
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To: Claud
But then you find out no one is willing to pay more than $200k for it. Essentially that $300k never existed, but you made assumptions that depended on it.

Very importantly, a mortgage lender may have made assumptions that depended on it, too -- like extending a $400k mortgage on a property that had an appraised value of $500k but an actual value of only $200k.

In this case, it's the lender that has the strongest incentive to prop up the value of the asset, not the borrower.

61 posted on 01/16/2016 11:23:00 AM PST by Alberta's Child (My mama said: "To get things done, you'd better not mess with Major Tom.")
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To: Jim Noble
"electronic debt booked as assets."

Never heard of that.  I do remember when AOL was capitalizing expenses,  though. That was hooey then and it's hooey now. They were fined $3.5 million for it.

Debts are liabilities, not assets, and if you define liabilities as assets, you can throw the balance sheet away.  Don't see that happening.
62 posted on 01/16/2016 11:23:37 AM PST by sparklite2 ( "The white man is the Jew of Liberal Fascism." -Jonah Goldberg)
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To: SkyPilot

ZeroHedgers hasn’t been this excited since 2007.

They think they will rule with their little piles of gold when everything collapses.

They wish for suffering on a planetary scale and they will continue to be disappointed. There will be no collapse. There will be a slow sinking into a dark age with Islam eventually ruling the world by sheer force of numbers.

Their gold will not save them. Nothing will save them or the rest of us.


63 posted on 01/16/2016 11:23:44 AM PST by SaxxonWoods (Trump and/or Cruz, it's all good.)
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To: Glad2bnuts
That is why the globullists are hell bent on a one world system, it will necessitate the destruction of old currencies and start the cycle of deception anew.

Bingo.


64 posted on 01/16/2016 11:23:51 AM PST by SkyPilot ("I am the way and the truth and the life. No one comes to the Father except through me." John 14:6)
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To: SkyPilot

Welfare has destroyed the work ethic for too many here in the US.


65 posted on 01/16/2016 11:25:01 AM PST by P.O.E. (Pray for America)
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To: SkyPilot

Inflation is a form of penalty. A tax is collected by the government, whereas inflation is collected by banks.

Obviously the government dictates a fair amount of inflation and gets a piece of the pie on income tax. But ultimately the financial markets and costs of goods and services themselves drive it.

The end result is also different. With a tax, we’re supposed to get some sort of benefit, whereas with inflation we don’t. Except for the rich elite that is.


66 posted on 01/16/2016 11:26:20 AM PST by Up Yours Marxists
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To: SkyPilot

Back around the last big crash I read of the M-something (don’t remember the number) which is the designation for the amount in dollars of printed physical money. It was a VANISHING fraction of the amount of the money people “have” in the bank. It was NOTHING really.


67 posted on 01/16/2016 11:26:45 AM PST by TalBlack (Evil doesn't have a day job...)
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To: Axenolith

I like that analogy. Thanks for sharing!


68 posted on 01/16/2016 11:28:33 AM PST by Up Yours Marxists
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To: SkyPilot

Weirdly enough it was the market and subsequent economic collapse right prior to obama’s election that was most likely the issue that put obama over the top.

Same thing appears to be happening now. Looks like “the market” doesn’t want Hillary to be elected.


69 posted on 01/16/2016 11:28:45 AM PST by catnipman (Cat Nipman: Vote Republican in 2012 and only be called racist one more time!)
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To: ClearCase_guy

Because in the real world the room has 6 people and a bank. The bank has $100 and under the current reserve requirements is able to lend ~$95+ to each of the 6 guys. Voila, the “money supply” has just expanded by close to 6X...


70 posted on 01/16/2016 11:30:13 AM PST by Axenolith (Government blows, and that which governs least, blows least...)
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To: Brian Griffin

“And if the $20,000 that I have in bank CDs buys more when the CDs mature, I won’t complain if I should be so lucky”

Indeed, we savers of cash would be king.


71 posted on 01/16/2016 11:30:43 AM PST by catnipman (Cat Nipman: Vote Republican in 2012 and only be called racist one more time!)
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To: SkyPilot

Deflation is really, really bad for an economy. I will say this, though. There has been a huge increase in the amount of cash in the economy since 2008. That (probably) indicates a thriving shadow economy. Outside of first world countries, most of the action is in the unofficial economy anyway. I think its changing here as well.


72 posted on 01/16/2016 11:33:48 AM PST by RKBA Democrat (The schadenfreude is going to be epic)
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To: HartleyMBaldwin

One of the most hilarious clips from South Park.


73 posted on 01/16/2016 11:35:21 AM PST by RKBA Democrat (The schadenfreude is going to be epic)
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To: Brian Griffin
Stocks are supposed to be merely a means of buying future income

Exactly, a stake and share in the fruits of a producer. Not a "war chest" to hype up in value in order to facilitate borrowing egregious sums to conquer and cannibalize.


74 posted on 01/16/2016 11:40:09 AM PST by Axenolith (Government blows, and that which governs least, blows least...)
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To: HartleyMBaldwin


75 posted on 01/16/2016 11:40:58 AM PST by Chode (Stand UP and Be Counted, or line up and be numbered - *DTOM* -w- NO Pity for the LAZY - Luke, 22:36)
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To: RKBA Democrat
South Park Clip....And It's Gone
76 posted on 01/16/2016 11:43:03 AM PST by SkyPilot ("I am the way and the truth and the life. No one comes to the Father except through me." John 14:6)
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To: alloysteel
If people have cash, they are sitting on it, and for those who do not have cash, their credit cards are about maxed out.

The actual data doesn't agree with your claim.

77 posted on 01/16/2016 11:43:50 AM PST by Toddsterpatriot ("Telling the government to lower trade barriers to zero...is government interference" central_va)
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To: Rusty0604
Not with fractional reserves. The banks lend out much more money than what really exists.

Banks can't lend out more than they take in.

78 posted on 01/16/2016 11:44:59 AM PST by Toddsterpatriot ("Telling the government to lower trade barriers to zero...is government interference" central_va)
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To: catnipman
'Looks like the market doesn't want Hillary.' Possibly, but the events which 'crashed' the markets worldwide in 2008 were more than likely engineered by those having short positions and politically motivated by the left. Soros et al are often mentioned. Recall McCain was ahead in the polls in September and then foolishly out of a bizarre false sense of honor decided to stop campaigning.

Perhaps a similar but more severe 'crash' next summer will make it easier for Obama to stay in the saddle to 'save' us.

79 posted on 01/16/2016 11:47:41 AM PST by masadaman
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To: Axenolith

Or, in very simply terms, the bank opens for business, takes in a $5 deposit from the guy who just sold his corn, then lends out $100 with $95 of that bring created out of thin air by fractional reserve banking. Most of that is binary digits but a truck from NYC does bring by some currency that the corn farmer borrows to buy another corn field from his neighbor for cash.


80 posted on 01/16/2016 11:55:12 AM PST by steve86 (Prophecies of Maelmhaedhoc OMorgair (Latin form: Malachy))
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