Feel That? It's The Chill Of Deflation

TMO ^ | 2-9-2015 | Chris Mayer

[blam]

February 08, 2015

Chris Mayer writes: That chill in the air? This is what deflation feels like...

Right now, the 10-year U.S. Treasury pays just 1.8%... oil is $50 a barrel... commodity prices drift near to chilling lows... and the dollar is near multiyear highs. These are all deflationary trends.

What deflation means for you as an investor is what I want to explore today. As an investor in stocks, there is a safe path through a deflationary Ice age.

I'll get to that in a moment. But first... what exactly is deflation?

The economic word deflation, says the Oxford English Dictionary, first appeared in print in 1920. The idea, I'm sure, is much older. But it is the economist Ralph G. Hawtrey who gets credit for putting the thing into words when he wrote, "Deflation... is a reversal of the process of inflation." For the record, Hawtrey was against it.

Hawtrey may be the first to define it, but definitions are dry, dead things, especially in this case. Deflation is so much more than falling prices. It is also distinctly chilly.

Barton Biggs used to write about Fire and Ice, always capitalized, borrowing from Robert Frost. Ice was deflation. In a memo dated Aug. 18, 1997, the former Morgan Stanley strategist defined Ice in more certain terms than Hawtrey:

Ice is a loss of pricing power and a world where prices are as likely to go down as up. Ice is an erosion of profits. Ice is excess capacity. Ice is developing countries with low-cost factories and huge new labor forces. Ice is creative price destruction from technology. Bursting stock market bubbles cause Ice... Ice is also about competitive devaluations, as countries try to export their unemployment and lack of growth.

(snip)

[Gamecock]

I’m sure we can blame it on Bush. That and Jim Crow laws.

[allendale]

Obama borrowed seven trillion dollars, printed another three trillion and proclaimed himself an economic genius.

[LS]

One theory I have heard for the absence of inflation, that SHOULD accompany such massive borrowing and money-printing, is that even with all this, we haven't begun to catch up with the unmeasurable explosion in productivity and value associated with technology.

Studies by Sir Henry Phelps-Brown of a "market basket" of goods from the 1200s to the 1970s showed that there never has been a "mountain range" of inflation---up and down---but rather a stair step associated with major social/economic reorganizations: 1) the commercial revolution of the 1400s; 2) capitalism and the industrial revolution of the 1700s/early 1800s; and 3) the technological/computer revolution of the 1980s-present.

[Idaho_Cowboy]

I get where this is coming from from an economic perspective, but we there are far more prices in play than oil. The FED is still trying to boost the money supply through the roof, if it weren't for the regulations keeping the reserves in the banks instead of getting into the hands of investors we would have massive inflation not deflation.

2nd has anyone who thinks that prices are falling tried to buy food lately?

[old curmudgeon]

It is my belief that before we have the last gasp, the FED will do something to free all of that funny money now locked up in the banking system and we will have inflation on the same scale as Germany had pre WWII and that we now see in Venezuela.

The debt will force it.

[Uncle Miltie]

Deflation caused by low oil prices is something I’ll take all day long.

[grania]

2nd has anyone bought food lately?

I took a walk through that grocery wonderland today. A lot of prices that had stayed stable are inching up.

Deflation doesn't seem to have much impact on those day-to-day expenses. It's things of lasting value that are declining in price. That's the way it seems, anyway.

[Star Traveler]

It’s not deflation here ... :-) ...

Gasoline Prices Rebounding Closer to $2 Average [Tulsa, OK]
http://www.freerepublic.com/focus/f-news/3255738/posts

[QuisCustodiet1776]

Real inflation is still running over 10% a year. This article is silly.

The reason we have not yet seen massive inflation is because the dollar is still the major trading currency - and because all of the governments around the world are printing money. It is a race to the bottom. There are few / no choices in safe currencies to flee to. So when it does blow up - it is going to be the worst economic meltdown in human history.

I’m anticipating a 40 year economic reboot.

[allendale]

Obama borrowed seven trillion dollars, printed another three trillion and proclaimed himself an economic genius.

[depressed in 06]

I’m sure we can blame it on Bush. That and Jim Crow laws.

All very good, but, we can't rule out Crusaders killing Moozies.

[Star Traveler]

Oil is going back up ...

Oil rallies for third day after OPEC sees greater crude demand
http://www.freerepublic.com/focus/f-news/3255755/posts

[MaxMax]

bfl

[I want the USA back]

Deflation is great for anyone with savings. It’s disastrous for government, which actively promotes inflation as a way of making the elderly poor and dependent on government.

[Varsity Flight]

Actually, the most accurate is the globe is under MASSIVE NO COLLATERAL: DEBT INFLATION.

You heard it here first! DEBT INFLATION.

Because there is NO ‘REAL’ COORESPONDING COLLATERAL. As in “real”-estate. This is the reason for the current Greece, and all the rest of the COUNTERFEIT “Restructuring” scam.

NO DIFFERENT FROM THE 08 MBS (fake/counterfeit) collapse.

No restructuring EVER took place in the U.S. instead it has GROWN WORSE..AND IT HAS been off-loaded onto the backs of others (NON-exempt citizens as COLLATERAL) in the largest human TRAFFICKING attempt in history, Extortion-Care. Extortion-Care MBS mortgages, backstop for debt.

Trafficking

Because it’s all about buying and selling human flesh as Body Mortgages by “insurance”-”banking”. To be bought, sold, and traded, like animals, as the next Mortgage Backed Securities. Trafficking

Which is why Extortion-Care was bribed through, the ponzi MBS backstop. Trafficking in the selling of Human Body Mortgages by so called “insurance-banking.”

The new MBS, leveraged to any amounts, to any forced deductibles, any forced premiums, any forced coercion taxation, any forced account seizures. The selling and trafficking in Human Body Mortgages.

So your now hearing the cries, to GROW, the global economy out of DEBT INFLATION,...

while Americans, in the form of ‘real’(as in real-estate) have the backstop load on their necks in the form of BodyMortgages BEING BOUGHT AND SOLD(the word mortgage means “death”-”grip”, see your dictionary.)

This IS trafficking, people.

[PoloSec]

As far as I can tell from my wallet, except for lower prices at the gas pump, inflation is traveling full speed ahead.

One would think that lower fuel prices would cause lower prices in most other things your average American citizen would spend money on; I just ain’t seeing it.

[Zionist Conspirator]

But again: isn't deflation a good thing???

[Varsity Flight]

That’s what DEBT INFLATION, causes

with cooresponding drop in labor participation rates, business closings AND unable to open new ventures.

[txrefugee]

Deflation is cured by massive wars that crank up production and kill thousands of younger men, thus reducing the labor surplus. As long as those dead do not include you or a loved one, you can make a handsome post-war profit. Millions have done that in the past.