Inflation Or Deflation, Which “ation” Is This?

I’ve been receiving a number of emails lately asking me whether I am a deflationist or an inflationist. Just as often I am asked if we’re in a deflationary environment or inflationary environment.

Truthfully, most of the us would do better if we simply dropped the “it’s either that ” paradigm of thinking for investing. Case in point, one can easily argue that stocks are in a bear market rally. But then again, with stocks up 60%+ since March 2009 (100+% for some emerging markets) one has to wonder just how stocks have to rise in order to be in a “bull” market.

The reality is that most of these titles stem from the investment community simply as a means of creating the illusion that somehow you can quantify market behavior into simple “it’s either this or it’s that” cycles and patterns. Most if not all of this is totally bogus. Indeed, more often than not, you get a bit of both options at the same time.

Few if any topics divide the investment community as greatly as the “ation” debate today. Most if not everyone is committed fully to some kind of “ation” outcome whether it’s deflation, inflation, or hyperinflation.

The reality is that both “ations” are existing right in front of our very eyes. We clearly have deflation in housing as well as most of the securities market (if the assets owned by banks were marked at anything resembling reality). On top of this there’s wages/ income dropping and the Dollar rallying again. Looks like deflation to me.

Yet, at the same time, we’ve got asset inflation in other areas like oil, food, and even stocks (all of which have risen in the last year… some by quite a lot). Heck, oil alone has nearly doubled in the last 12 months. That’s some serious inflation right?

RE:”Yet, at the same time, we’ve got asset inflation in other areas like oil, food, and even stocks (all of which have risen in the last year… some by quite a lot). Heck, oil alone has nearly doubled in the last 12 months. That’s some serious inflation right?”

I posted this January 2009: This is true of all commodities you are going to see huge supply problems, the worlds inventories of food are the lowest they have been in 50 years. We have a shortage of fertilizer, we have a shortage of tractors, and we have a shortage of farmers… .Jim Rogers/Asian Financial Forum (World Commodities fundamenals enhanced)a few freepers cursed him in the replies LOL

Inflation Or Deflation, Which “ation” Is This?

And think about all those Nobel-winning "economists;" from the same Academy that gives Barack Obama, Yassar Arafat, and Jimmy Carter world-enveloping Prizes.

However the simple minded, the college sophomores, the Harvard U. Professors, Obama's advisors, the Media, need simple minded verbalised concepts. We suggest "impoverishment," the increase in essentials, the simultaneous decrease in accoutrements, as we peasants are squeezed into servitude by phony economic algorithms.

Johnny Suntrade, The Suntrade Institute

“The reality is that most of these titles stem from the investment community simply as a means of creating the illusion that somehow you can quantify market behavior into simple ‘it’s either this or it’s that’ cycles and patterns.”

Too true. It’s an excuse endlessly repeated by liars and/or polyannas, who pretend everything is fine so long as The Economy as a whole isn’t in runnaway inflation or deflation. Economists do love to talk about aggregates, price indices, GDPs, and all. What they never seem to admit is that when one or another part of the whole economic system is different from the aggregate, it can be a bad thing. It is as if so long as prices are not rocketing or plummeting for everything at once, we’re fine.

What happens when there’s price inflation in gasoline, healthcare, dot-com stocks, or college tuition, but not in The Economy? They’d like us to think everything’ll be okay. When prices are rocketing for houses but not necessarily for milk, milk cancels houses out, right? No. Houses can sink The Economy. But if the financial wizards told us that, we’d lose faith in the financial system and the ponzi scheme would collapse.

The point is, aggregates don’t matter and never have. tehy’re something for politicians to babble about and for economists to secure their tenures with. A few exceptions. When The Economy grows or contracts significantly for a significant period of time, it’s significant. It shows an identifiable trend. it tells you you’re in Good (or bad) Times. Fine. Also, when you have runnaway inflation á la the Weimar Republic or runnaway deflation á la the U.S. in 1932, the aggregate can tell you something. However, in both case (overall economic expansion/contraction or runnaway inflation/deflation) by the time you get the info, it’s too late to do anything about it. Whatever you do to counter it in the future will most likely be wasted, since by the time the future comes, things’ll be different. That’s how it works with Big Things like The Economy.

He was recommending commodities (oil) in January 2009 in that post you laughed at

It's the least he could do after recommending oil at $140 and Chinese stocks when the Shanghai index was double what it is today.

Any freepers who took the post serious got rich.

If they had any money left after following his earlier advice.

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