18-Sep-10 News -- Near-zero CPI hints at deflation

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18-Sep-10 News -- Near-zero CPI hints at deflation

Postby John » Fri Sep 17, 2010 11:24 pm

18-Sep-10 News -- Near-zero CPI hints at deflation

Housing foreclosures continue to hit new record levels

** 18-Sep-10 News -- Near-zero CPI hints at deflation
** http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e100918#e100918
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Re: 18-Sep-10 News -- Near-zero CPI hints at deflation

Postby vincecate » Fri Sep 17, 2010 11:41 pm

John wrote:If we were in any other generational era, it would mean massive inflation, but in this generational crisis era, deflationary trends cannot be overcome.


The Revolutionary War and the Civil War both had hyperinflation and both were generational crisis eras. In WW2 America did not get hyperinflation, but in 2 of the last 3 crisis eras it did get hyperinflation. So how can you say "in this generational crisis era, deflationary trends cannot be overcome"? Would it not be more accurate to say, "given America's last 3 crisis eras we can estimate there is a 67% chance of hyperinflation in this crisis era"?
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Re: 18-Sep-10 News -- Near-zero CPI hints at deflation

Postby fischer_76 » Sat Sep 18, 2010 10:04 am

while deflationary sources are VALID
HOUSING, CASH

inflationary sources are stirring in everything we need
like FOOD, HEALTHCARE, UTILTIES, SERVICES, FEES, TAXES

and BTW helicoptor ben has already said he will not allow deflation - meaning he is going to print money faster than barack can spend it

and this dicotomy WILL LEAD TO HYPER-INFLATION
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Re: 18-Sep-10 News -- Near-zero CPI hints at deflation

Postby John » Sat Sep 18, 2010 11:29 am

Dear Vince,

vincecate wrote:> John wrote:If we were in any other generational era, it would mean
> massive inflation, but in this generational crisis era,
> deflationary trends cannot be overcome.

> The Revolutionary War and the Civil War both had hyperinflation
> and both were generational crisis eras. In WW2 America did not get
> hyperinflation, but in 2 of the last 3 crisis eras it did get
> hyperinflation. So how can you say "in this generational crisis
> era, deflationary trends cannot be overcome"? Would it not be more
> accurate to say, "given America's last 3 crisis eras we can
> estimate there is a 67% chance of hyperinflation in this crisis
> era"?


For the zillionth time, Vince, the US dollar was not a world reserve
currency in the 1780s or the 1860s, but is a reserve currency today.

I recently read an article, but can't find the reference right now,
about how inflation is increasing in China. That's because of China's
stimulus and bailout programs, and the fact that the yuan is not a
world reserve currency. I would not be surprised in the least if
China goes down the hyperinflation route.

Perhaps you should be selling gold to the Chinese. Why don't you
check with Sam and see what she thinks?

John
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Re: 18-Sep-10 News -- Near-zero CPI hints at deflation

Postby John » Sat Sep 18, 2010 11:30 am

fischer_76 wrote:> and BTW helicoptor ben has already said he will not allow
> deflation - meaning he is going to print money faster than barack
> can spend it


This is a debate we've been having since this forum started over two
years ago. Here are two forum threads you may wish to read through:

** Inflation, deflation, gold and currencies
** viewtopic.php?f=14&t=442

** Financial topics
** viewtopic.php?f=14&t=2

With regard to helicopter Ben, I'm reminded of the old joke about the
guy who says, "I used to have six theories about raising children.
Now I have six children and no theories."

Bernanke used to believe that the Great Depression could have been
avoided simply by lowering interest rates. Bernanke used to believe
that "deflation is impossible with a 'fiat' currency, because the
central bank can simply print more money, preventing deflation."

Both of these theories have been completely disproven by the
experience of Japan since their 1990s stock market crash. Low
interest rates, stimulus, bailouts, quantitative easing have all
failed to stop inflation. Japan's CPI has fallen each month for last
18 months.

This is actually a big surprise to me, because I would have thought
that after 20 years, deflation would have ended just in the normal
course of events, even without printing money. But what seems to be
the case is that all the stimulus and bailouts have done is POSTPONE
the inevitable, and the worst is yet to come for Japan -- and for the
rest of the world.

The problem is that the Fed can't print money fast enough to replace
the money that's being destroyed through deleveraging. All that money
that was created through debt the the credit bubble is being
destroyed, and the amount of money being inserted into the economy is
less than the amount being destroyed, so deflation occurs.

John
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Re: 18-Sep-10 News -- Near-zero CPI hints at deflation

Postby vincecate » Sat Sep 18, 2010 12:21 pm

John wrote:For the zillionth time, Vince, the US dollar was not a world reserve currency in the 1780s or the 1860s, but is a reserve currency today.

I recently read an article, but can't find the reference right now, about how inflation is increasing in China. That's because of China's stimulus and bailout programs, and the fact that the yuan is not a world reserve currency. I would not be surprised in the least if China goes down the hyperinflation route.


So if people stop using the US dollar as the world reserve currency, then you would agree the dollar could get hyperinflation?
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Re: 18-Sep-10 News -- Near-zero CPI hints at deflation

Postby vincecate » Sat Sep 18, 2010 6:23 pm

John wrote:The problem is that the Fed can't print money fast enough to replace the money that's being destroyed through deleveraging.


In Zimbabwe they figured out how to print both "One Hundred Trillion Dollars" and also "$100,000,000,000,000" on each piece of paper. You think the Americans are any less capable?

The Treasury is borrowing an extra $1.5 trillion per year. Do you really think people/companies are paying down more than $1.5 trillion in debt per year? In this economy? Reports are there is an "issuance surge" as companies want to take advantage of the crazies loaning money at near 0% (largely the Fed I suspect).

Companies issued $19.2 billion in new bonds on Tuesday. This is a record for the last 19 months:

http://www.nasdaq.com/aspx/company-news ... strengthen
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Re: 18-Sep-10 News -- Near-zero CPI hints at deflation

Postby xakzen » Sat Sep 18, 2010 11:37 pm

vincecate wrote:
John wrote:The Treasury is borrowing an extra $1.5 trillion per year. Do you really think people/companies are paying down more than $1.5 trillion in debt per year? In this economy? Reports are there is an "issuance surge" as companies want to take advantage of the crazies loaning money at near 0% (largely the Fed I suspect).

It isn't the fact that companies & the public are paying down debt that is reducing the amount of money. The money is already lost to bad loans on inflated assets that will never be worth par again. The fact that the Fed is allowing the banks, pension funds, insurance co, etc to keep these "toxic" assets on their books at par is the only thing keeping the semblance of normalcy. The problem I see is that we (America & Europe) are heading down this rat hole that Japan started over 2 decades ago with 2 crucial headwinds: we are not an export economy, the demographic shift of Boomers into their retirement (semi-?) phase of life. Japan has nothing to so for it's lost decades except 200% Debt/GDP which many believe they will eventually have to default on as their population retires.
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Re: 18-Sep-10 News -- Near-zero CPI hints at deflation

Postby vincecate » Sun Sep 19, 2010 5:47 am

Sorry, duplicated post by hitting quote and not edit. See next.
Last edited by vincecate on Sun Sep 19, 2010 6:55 am, edited 1 time in total.
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Re: 18-Sep-10 News -- Near-zero CPI hints at deflation

Postby vincecate » Sun Sep 19, 2010 6:16 am

xakzen wrote: Japan has nothing to so for it's lost decades except 200% Debt/GDP which many believe they will eventually have to default on as their population retires.


Defaulting to non-voting foreigners can help your local economy, you get ride of a debt burden. However, Japan owes this debt to their own citizens, including the ones that are retiring. Defaulting to your own retiring voters, who you need to take care of anyway, does not provide any gain to the local economy. Defaulting to your own voters, when you can print money, is unheard of. It won't happen. Japan will print money and pay off these loans. As they do, the value of the yen will fall fast, people will flee the yen, and they will get hyperinflation.

Some call printing money to pay off loans defaulting, since you are paying with cheap money and not giving full value. So maybe that is what you meant.

Bankruptcy for governments that can print money is called "hyperinflation".
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