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Tyler Durden 05/26/2014 For the last several years, nobody has been more outspokenly bearish on Japan than Kyle Bass. In a recent talk, Bass reiterated his doubts about Japan’s chances of averting a debt crisis. What’s more, he also said China’s economy will fall below expectations. Bass changed one aspect of his outlook on Japan. Instead of predicting a collapse of the Japanese bond market, he focused on a severe weakening of the yen – without predicting when that might happen. His predictions for China were equally distressing. He said that its banks will be saddled with non-performing loans and...

One of European Central Bank President Mario Draghi’s most important duties is watching his mouth. One ill-considered utterance is enough to sow panic on the financial markets. But during a press conference earlier this month, Draghi allowed himself a telling slip. Speaking to gathered journalists at the Spring Meetings of the International Monetary Fund and the World Bank, Draghi twice almost uttered a word he has been at pains to avoid. “Defla…”, Draghi began, before stopping himself and continuing with the term “low inflation.”Yet despite Draghi’s efforts, the specter of deflation was omnipresent in Washington during the meetings. And it...

The fear of deflation serves as the theoretical justification of every inflationary action taken by the Federal Reserve and central banks around the world. It is why the Federal Reserve targets a price inflation rate of 2 percent, and not 0 percent. It is in large part why the Federal Reserve has more than quadrupled the money supply since August 2008. And it is, remarkably, a great myth, for there is nothing inherently dangerous or damaging about deflation. Deflation is feared not only by the followers of Milton Friedman (those from the so-called Monetarist or Chicago School of economics), but...

Harry Dent predicts mild inflation, then massive deflation, then mild inflation.

Forget all the talk about CPI or as they call it in Europe HIPC (harmonized index of consumer prices) floating just under 1%. The true measure of inflation is credit expansion. And for the second month, credit contracted in the Eurozone. Reuters reports Euro zone lending contraction compounds ECB headache. Lending to households and firms in the euro zone fell again in January and money supply growth remained subdued, adding to pressure on the European Central Bank to take action next week to support the economy. The ECB has cut interest rates to a record low, pumped extra liquidity into...

If you repeat something completely inane enough times, do people, even economic writers, believe it?

Get ready for the next era in retail—one that will be characterized by far fewer shops and smaller stores. On Tuesday, Sears said that it will shutter its flagship store in downtown Chicago in April. It's the latest of about 300 store closures in the U.S. that Sears has made since 2010. The news follows announcements earlier this month of multiple store closings from major department stores J.C. Penney and Macy's. Further signs of cuts in the industry came Wednesday, when Target said that it will eliminate 475 jobs worldwide, including some at its Minnesota headquarters, and not fill 700...

One piece of the jigsaw puzzle is missing to complete the deflation landscape across the West: a slide in oil prices. This is becoming more likely each month. Turmoil across the Middle East and parts of Africa has choked supply over the past two years, keeping Brent crude near $110 a barrel despite a broader commodity slump. Cotton and corn prices have halved, as has the UBS index of industrial metals. Such anomalies rarely last. "We estimate that crude oil is now the mostly richly priced commodity in the world," says Deutsche Bank in a fresh report. Michael Lewis, the...

Forget the Federal Reserve — the real threat to gold’s price is deflation.That’s the argument over at Societe Generale this morning. No, not runaway, Depression-style deflation — but rather the threat of a stubborn resilience in the value of major currencies, which would be a clear negative for an “alternative currency” like gold. It would happen on account of investors’ unwillingness to behave like they usually do in economic normalcy. It would also happen as a result of stocks’ surging prices. At minimum, a lack of inflationary pressure of the sort investors are seeing lately, and may well see...

(Reuters) - The possibility that the Federal Reserve could finally start to trim its extraordinary stimulus for the economy could make this week an explosive one for financial markets. Though the odds still point to no major policy change when U.S. central bankers meet December 17-18, most of the recent domestic economic data suggest the beginning of the end of their massive bond-buying program is coming sooner than later. If it acts it may reflect as much a growth in confidence in the global economy, for whom the withdrawal of the flow of cheap dollars will be a shock, as...

Several economic indicators for the US show deceleration. Yet the stock market and house prices continue to grow. Here is a chart of three economic indicators with clear downward momentum: civilian labor force participation (blue), the US homeownership rate (red) and real median household income (green). homessss And Goldman Sachs just downgraded Q4 2013 real GDP growth to 1.3%. These downward indicators compliment the declining M1 Money Multiplier and M2 Money Velocity. m1m2vel120213 Why? There are enormous excess reserves in the Fed system that aren’t leaking out to Main Street. And The Fed’s Balance sheet has exploded! (in terms of...

Steen Jakobsen, Chief economist at Saxo Bank in Denmark, pinged me today with his thoughts on "the morning after" and "price discovery". In my opinion these two paragraphs of the FOMC Statement are the key ones: The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic...

The Bernanke Fed Is Playing With Deflationary Fire By Ambrose Evans-Pritchard June 24th, 2013 I hope the Fed knows what it is doing. It has chosen to tighten monetary policy even though core PCE inflation is actually lower right now than it was when the Fed previously thought it dangerous enough to launch further QE. America is one shock away from a slide into outright deflation, and the eurozone is half a shock away. Anyone who still thinks the Fed has not just tightened significantly – or that markets have overreacted – should read this lament by St Louis Fed...

Ben Bernanke Has Burst The 'Euphoria' Bubble Walter Kurtz, Sober LookJune 26,2013Credit Suisse Risk Appetite Index Sober Look ï‚ž The last time we discussed the Credit Suisse Global Risk Appetite Index, it was headed for "euphoria" (see this post from May 21). Around May 22 something changed, and it was all downhill from there. It was Bernanke's first hawkish statement. May 22; Bernanke: - WeÂ’re trying to make an assessment of whether or not we have seen real and sustainable progress in the labor market outlook. If we see continued improvement and we have confidence that that is going to...

A Whole New Group Of People Is Going To Start Worrying About The Gold Crash Jow WeisenthalJune 26, 2013, 5:26 AMBack in the day, a few years ago, when gold was soaring, anti-Fed types saw this as indication that Bernanke was blowing bubbles and creating hyperinflation. Of course, the price of gold is just the price of gold, but it didn't stop people from making bold statements about how gold was "voting" against Fed policy so to speak. Well now gold is totally crashing. At the start of April it was near $1600/oz. This morning it's not much above $1200/oz....

The Deflationist Error Economics / Deflation June 24, 2013 - 05:52 PM GMT By: Alasdair Macleod Many people believe there is a significant risk that the Irving Fisher debt-deflation theory of great depressions is still an economic threat today. They overlook the fact that Fisher published his theory examining debt-deflation events under a gold standard, which does not apply today. Financial credit contractions therefore take a different appearance. The events he described arose as a consequence of the earlier expansion of bank credit in a fractional reserve system when the currency being used was convertible into gold. This was the...

We Are Witnessing A Rare Across-The-Board Selloff In The Global Markets Sam Ro June 20, 2013 Usually, when one asset class sells off, another rises. And when a lot of asset classes fall, the so-called "safe havens" will rise. These include things like U.S. Treasuries, gold, and a handful of other currencies like the Swiss Franc or Japanese Yen. However, everything is selling off right now. "Rare to see every futures market I follow down," tweeted bond trader Ed Bradford. Here's a look at a bunch of futures via FinViz.

It's A Mistake To Worry About Inflation Kenneth Rogoff, Project Syndicate June 8, 2013, 3:30 PM CAMBRIDGE – The world’s major central banks continue to express concern about inflationary spillover from their recession-fighting efforts. That is a mistake. Weighed against the political, social, and economic risks of continued slow growth after a once-in-a-century financial crisis, a sustained burst of moderate inflation is not something to worry about. On the contrary, in most regions, it should be embraced. Perhaps the case for moderate inflation (say, 4-6% annually) is not so compelling as it was at the outset of the crisis, when...

Deflation Smackdown: Bernanke’s Madcap Money Printing Fails To Boost Inflation Economics / Deflation Jun 03, 2013 - 02:25 PM GMT By: Mike Whitney “Under a fiat money system, a government… should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero.” Ben S. Bernanke, “Deflation: Making Sure It Doesn’t Happen Here”, November, 2002" The US economy is in a liquidity trap which means that the demand for credit is weak even though the Fed is increasing the monetary base (via the creation of reserves at the banks) and interest rates...

Doug Short at Advisor Perspectives has a pair of interesting reports on price inflation as measured by the CPE and PCI. Please consider PCE Price Index Update: Sorry Fed, The Disinflationary Trend Continues. The latest Headline PCE price index year-over-year (YoY) rate of 0.74% is a decrease from last month's adjusted 1.01%. The Core PCE index of 1.05% is decrease from the previous month's adjusted 1.17%. It is the lowest Core PCE ever recorded; the previous all-time low was 1.06% in March 1963, fifty years ago. The continuing disinflationary trend in core PCE (the blue line in the charts below)...