Posted on 08/03/2010 6:43:39 PM PDT by Perdogg
senior fund manager at bond-fund giant Pacific Investment Management Co. said Tuesday it is "extremely unlikely" the U.S. could see Japan-like deflation given that the Federal Reserve has the tools to combat a downward spiral in consumer prices.
But Mihir Worah, who manages Newport Beach, Calif.-based Pimco's $17.87 billion Pimco Real Return Fund, admitted high unemployment and weak consumer spending—which the latest data show was flat in June—pose a risk to his outlook. His comments underscored a point made by Pimco's co-chief investment officer Bill Gross, who said recently "it's an uncertain world that's tipping toward deflation."
ping
So what is coming? Hyper-inflation?
Seems to me that the Japanese had and have the exact same tools that he thinks the Fed has.
This is the first article I’ve ever seen that claims the Fed has tools to fight deflation. Everything else I’ve ever read says that it’s easy for the Fed to fight inflation: they simply tighten the money supply.
However, these same articles also always claim the Fed has limited ability to fight deflation, because once they drop interest rates to zero and that doesn’t work, then that’s it, there’s nothing else the Fed can do. That’s what happened in Japan, and that’s where the U.S. is headed right now.
Tools like hammer?
To hummer it back? Itsa Voltswagen!
Exactly. We spent the 1990’s lecturing the Japanese on how they were making all these mistakes that would lead to a long term recession of their economy. They did like 8 stimulus packages over the past 20 years + that included all kinds of “broken window” government spending policies.
The same “broken window” policies the Obama government keeps spending on.
Broken Window = Breaking all the windows, then paying someone to fix them. Meaning that’s the governments idea of how to create jobs, instead of letting the free market take care of it instead.
Yep, just like the Far Side cartoon, with the note tied to the brick thrown through the window that said, “Bricks thrown thru your window? Call Al’s Glass”
Deflation will not happen as long as the government owns a printing press.
Watch silver and gold and copper break to new highs.
Watch silver and gold and copper break to new highs.
Japan = 8 stimulus packages over 20 years. About 1.5 trillion in all. Massive public works projects like the worlds most expensive airport on a man made island, and paving over everything again and again.
20 years later, the only thing that helped them was their export business, not the broken window spending. They still have abysmal private job creation, a huge looming baby boomer generation that’s going to demand to be financially taken care of by the younger one.
Meanwhile the USA can’t export their manufacturing jobs overseas fast enough in anyway they can to help save a buck in the short term.
Inflation here we come.
In a deflationary environment, copper prices deflate. Likewise, Gold and Silver.
Yes, of course. What I meant to say is that metals will move to new highs as people scream that defaltion is here. I think both will be right.
Well, Timmy Tax Cheat Geithner was in Japan during the early 90’s, so there’s no way we will repeat their mistakes.....the same guy that was at the helm of the NY Fed before accepting his current gig....
Nielson: The End Game Is Either Hyperinflation Or Debt Implosion – Got Gold?
to make a long story short...
Hyperinflation, Money Demand, and the Crack-up Boom
http://mises.org/daily/4016
Inflation, Deflation or Hyperinflation? (Part 3)
I wish they would explain why all the fiscal and monetary stimulus the government has done since October, 2008 hasn’t worked yet. The fact is fiscal stimulus never works and never has. But it will leave us saddled with huge debt.
http://seekingalpha.com/article/212199-inflation-deflation-or-hyperinflation-part-3
Highway Robbery July 27, 2004 On the “broken window fallacy.”
http://www.cato.org/pub_display.php?pub_id=2767
Opportunity Costs: The Sacrifice of the Road Not Traveled
As was predicted by those who understand opportunity costs, the cost of the government making this choice turned out to be worse than had our leaders decided against it.
http://www.carolinajournal.com/articles/display_story.html?id=6054
The Fine Art of Legal Plunder
http://www.fluxneo.com/llbarnhart/bastiat.htm
Revisiting the Supply-Side Effects of Government Spending
It follows that an increase in government spending can crowd-out private investment simply by reducing household net worth. As a result, market incompleteness can seriously upset the supply-side effects of fiscal shocks: an increase in government consumption, even if financed with lump-sum taxation, tends to reduce capital intensity, labor productivity, and wages in both the short-run and the long-run.
http://www.federalreserve.gov/pubs/feds/2009/200901/index.html
Federal Debt and the Risk of a Fiscal Crisis Congressional Budget Office JULY 27, 2010
http://www.cbo.gov/ftpdocs/116xx/doc11659/07-27_Debt_FiscalCrisis_Brief.pdf
New York Fed Transparency: Bank To Disclose Which Securities Were Bought In AIG Bailout
Identifying the assets “would compromise the New York Fed’s ability to maximize value for the taxpayer in the long-run,” New York Fed President William Dudley wrote this month.
http://www.huffingtonpost.com/2010/03/31/new-york-fed-transparency_n_520847.html
Foreclosed On—By the U.S. - WSJ.com
http://online.wsj.com/article/SB10001424052748704499604575407584128526218.html?mod=WSJ_hpp_LEFTWhatsNewsCollection
Money Supply Divergence - TMS1 vs. TMS2 vs. M2 - What does it Mean?
Bear in mind, the Fed has so distorted the system that “It’s all credit”. There is nothing backing any of this, including checking accounts.
http://globaleconomicanalysis.blogspot.com/2010/07/money-supply-divergence-tms1-vs-tms2-vs.html
“Global Leaders”: Interview with Robert Mundell
And then, it was the policies that were taken after war as, such as increasing taxes. They just did all the wrong things and that kept the economy in recession for a long time.
But government spending doesn’t have that bigger effect. If you have a big increasing government spending, without monetary expansion, they have to finance that deficit by bringing bonds. So while the spending adds to demand, the selling of the bonds, takes away the demand. So if there’s a multiplier in one process, there is a negative multiplier with the other process. And the other fact is that the exchange rate is flexible. So if you sell more bonds with a stimulus pending interest rates rise a little bit. And the capital comes in, the current account deficit increases. The trade deficit increases. So a good part of that stimulus package goes to the rest of the world.
You have to do something to get the employers employ people. The way to get more employment is to make it profitable for employers to employ people. And that comes out of profits.
Well the high corporation tax is not capitalism. It’s again the foot on the face of the corporation. And it’s ridiculous to say that the problem is capitalism, the problem is the tax system.
http://www.global-leaders.tv/en/archive/robert_mundell.asp
Alabama Proves That Incentives Work
http://www.awb.org/articles/presidentscolumn2004/alabama_proves_that_incentives_work.htm
How Bernanke Is Using the Printing Press to Win Friends and Influence People
http://mises.org/media/4827
Peter Schiff silenced on CNN International 11/24/2008
http://www.youtube.com/watch?v=nbvL4u-MrVM
dollar stress, Bernanke, GM, gold dealers
http://www.youtube.com/watch?v=F1zzcuk7JQM
Dollar, Paul Krugman
http://www.youtube.com/watch?v=11WlFlO_mDg
Recipients of Total USDA Subsidies from farms in United States totaled $245,156,000,000 in from 1995-2009.
http://farm.ewg.org/top_recips.php?fips=00000&progcode=total
Just give it a few years and we will all see.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.