OT (or maybe not): Do you believe INflation or DEflation for the next 5 years?

[Hedge Collector]

hopefully, mild inflation. Deflation is bad.

 

Isn't inflation even worse?

 

No way. Inflation is manageable (up to a point). Deflation is a viscious downward spiral.

 

People stop buying now because everything will be cheaper tomorrow. The whole economy starts to grind to a halt.

 

Give me inflation any day.

 

Be careful what you wish for.

 

Inflation can be just as vicious. Some examples would be Weimar Germany, Zimbabwe, even Vietnam today.

 

When people lose faith in their currency, and start shedding it for practically any other good, that can be just as downward spiral and vicious.

 

Volcker had to raise the fed funds rate to 20% in 1981 to combat stagflation.

 

Can you imagine? Getting high double digits interest in our savings accounts!

[thehumantorch]

hopefully, mild inflation. Deflation is bad.

 

Isn't inflation even worse?

 

No way. Inflation is manageable (up to a point). Deflation is a viscious downward spiral.

 

People stop buying now because everything will be cheaper tomorrow. The whole economy starts to grind to a halt.

 

Give me inflation any day.

 

Managed inflation or deflation has winners and losers. Inflation helps those with large amounts of debt and hurts those that have lots of cash or those on a fixed income. Deflation is the opposite.

 

Hyperinflation or hyperdeflation is a different kettle of fishsticks.

 

In 1946 Hungary had a daily inflation rate of 207% and prices doubled every 15 hours. Cash value is destroyed but those with debt win.

 

 

[kapowcat-migration]

But not from a bank hedge,anyway we just don't agree on this subject! Best regards to you.

[ft88]

So when computer prices fell for the last 10 years, you never bought one because you could always get one for cheaper later right?

 

How about long distance calling? or internet service?

 

If you get a job in a different location tomorrow, will you buy a house even though you "know" it will drop in value? Or rent even though you could find a similar apartment for less money in a month.

 

My point is that deflation is highly managable and even natural. But in modern times (since the Fed was created anyway) inflation has been the norm with money and credit expansion always pushed. Now we have a credit crash and a money printing explosion and so far the credit crash has won.

 

I believe the credit crash will continue for a long while yet so prices will fall. The real worry is if and when a recovery happens and credit expands, will the Fed really suck up all that money printed? You think the dollar is weak now, it'll crash bad depending on how the Fed handles it. It will not be pretty.

 

Ed

[kapowcat-migration]

Ed,you are above my pay grade! Best regards

[delekkerste]

For those of you who don't venture into The Water Cooler:

 

A scientific approach is to assess what is, rather than what we would like things to be, and to draw conclusions carefully from it, calculating probabilities when the evidence does not support a single outcome, and a willingness to accept new data and act on it when it appears, even if it appears contrary to a current working hypothesis.

 

(thumbs u

 

Thanks, I couldn't have said it better myself. That's exactly the point I have been making the past several days about the inflationistas being wedded to the idea of inflation in the face of overwhelming contrary evidence.

 

Seriously, inflation?

 

(a) We are in a debt-deflationary spiral - the natural outcome to a bursting credit bubble - as trillions of dollars of existing credit is wiped out.

 

(b) Credit growth is falling. M2 is falling and M1 growth is moribund.

 

© CPI is falling.

 

(d) Housing prices are falling. I love it when the inflationistas argue that housing prices will plummet in value even as inflation is/will be raging. Talk about selectively choosing your arguments based on preconceived notions! In fact, if they are right, everyone should borrow as much as they can at low rates with soon-to-be worthless dollars to buy the most leveragable real asset out there - real estate.

 

(e) There is tremendous slack in the economy - capacity utilization is approximately 2/3rds.

 

(f) The job market is weak and wages are stagnant.

 

(g) Commodity prices are down by almost half from their 2008 peaks.

 

(h) Bond yields are near their historical lows with the 30-year T-bond yielding less than 4%.

 

(i) The savings rate is at a multi-year highs. Consumers are hoarding cash - the exact opposite of inflationary behavior.

 

(j) The U.S. dollar, for all its recent weakness, is well off its 2008 lows. And, it has started to strengthen again - something I believe will continue - just look at the 10-11 cents it has appreciated against the British pound in the past 2 months.

 

Seriously, where is there any evidence of inflation aside from the expansion of the Fed's balance sheet? Inflation is an increase of money and credit relative to available goods. Money growth is actually falling - you can't just look at the monetary base in a fractional reserve banking system - you have to look at velocity too. Credit growth is negative and the stock of existing credit has been and continues to shrink. The symptoms of inflation, of course, are rising prices. We have seen it in asset prices of late, but I bet every inflationista out there would agree with me that stock prices will deflate, yet again picking and choosing their spots according to their preconceived notions.

 

I fully concede that inflation may be a problem in the future - in fact, I think it is the more likely outcome. However, to say that it has been here, is here now, or will be imminent in coming is doing exactly what the author of your piece criticizes - sticking with a pre-conceived notion in the face of overwhelming contrary evidence.

[thirdgreenham]

 

So, should I borrow money to buy houses or not? :shrug:

[fantastic_four]

CGC saved us if its a money matter

 

Not just CGC--it's the synergy between CGC and how it enabled the trade of high-dollar books via the Internet. Those two together are what's "saved" the high-end hobby.

[fantastic_four]

comics are not liquid,its a hobby (WHO THE HELL IS OVERSTREET) however we baby boomers can do things from the TWILIGHT ZONE me included,God help me!. Best regards to all my fellow collectors.-- (hey I love americana) -- 7% in your investments to 10% but no more? P.S. its a scam just like 50% of wall street is, if the economy is well so is this great hobby,CGC saved us if its a money matter. Yeah like OVERSTREET can pick values,what B.S. I would love to have that power! GOLD,GOLD,PROPERTY,LIQUIDITY IS KEY! IN BAD TIMES.

 

i cant argue with this.

 

cant understand a word of it neither.

 

If you treat each phrase ended almost randomly by a comma, period, question mark, exclamation point, or dashes, then each phrase in and of itself makes sense as a separate point.

[fantastic_four]

So, should I borrow money to buy houses or not? :shrug:

 

No, you should be borrowing it to blow on high-grade DC war books.

[qualitycomix]

I agree with much of what you've said Gene.

 

There is one interesting theory out there.

 

It basically talks about how credit is contracting/evaporated in the following order:

1) derivatives get flushed out first

2) followed by commercial and private real estate

3) then securitized debt/stocks

4) then bonds and t-bills

5) then physical notes (fiat currency)

6) eventually gold and silver are all that are left

 

NOT sure I agree with it, but it does appear that 1 and 2 have already happened. The Fed is trying like h e ll to prevent #3 and #4 from disappearing.

 

Obviously, this is worst case scenario stuff which hardly ever happens. It is interesting to see the progression if it does indeed follow this route.

 

And deflation is occurring right now, not inflation.

[delekkerste]

 

So, should I borrow money to buy houses or not? :shrug:

 

I'm agnostic on that, because I believe in deflation now (undeniable) and inflation later (probably, but not a certainty). It *might* end up paying off in the end, but it's not a strategy I would pursue myself at this time.

 

On the other hand, any inflationista who tells you that raging inflation is coming and the dollar is going to collapse, but won't advocate borrowing cheap money to buy the most leveragable real asset out there (property) and to repay the loan in the future with devalued dollars, is simply not to be believed. Anyone who truly believes in that economic scenario (I am not in that camp, at least not for the short or medium-term) should be leveraging up to the gills buying property and other real assets with borrowed dollars.

[qualitycomix]

 

So, should I borrow money to buy houses or not? :shrug:

 

I'm agnostic on that, because I believe in deflation now (undeniable) and inflation later (probably, but not a certainty). It *might* end up paying off in the end, but it's not a strategy I would pursue myself at this time.

 

On the other hand, any inflationista who tells you that raging inflation is coming and the dollar is going to collapse, but won't advocate borrowing cheap money to buy the most leveragable real asset out there (property) and to repay the loan in the future with devalued dollars, is simply not to be believed. Anyone who truly believes in that economic scenario (I am not in that camp, at least not for the short or medium-term) should be leveraging up to the gills buying property and other real assets with borrowed dollars.

 

(thumbs u

[delekkerste]

(thumbs u

 

If a worst-case scenario happens, that is the path it will take. I am not ruling it out (eventually), but a lot of people have been pounding the table that we are on the cusp of stage #5 and that simply is contrary to almost all of the evidence. I think if it gets that bad it will likely be some years away, probably when the government is dealing with all the accumulated debt and then has to wrestle with the unfunded liabilities coming due with the Baby Boomers retiring (or hoping to retire).

 

I think it makes sense to be diversified and to be at least somewhat prepared for any eventuality - that's how my personal portfolio is positioned even if I believe deflation is the bigger/biggest threat at the moment.

[qualitycomix]

(thumbs u

 

If a worst-case scenario happens, that is the path it will take. I am not ruling it out (eventually), but a lot of people have been pounding the table that we are on the cusp of stage #5 and that simply is contrary to almost all of the evidence. I think if it gets that bad it will likely be some years away, probably when the government is dealing with all the accumulated debt and then has to wrestle with the unfunded liabilities coming due with the Baby Boomers retiring (or hoping to retire).

 

I think it makes sense to be diversified and to be at least somewhat prepared for any eventuality - that's how my personal portfolio is positioned even if I believe deflation is the bigger/biggest threat at the moment.

 

Right again from my perspective. We are not anywhere close to losing the dollar. It's still the world's reserve currency and we are years away from any replacement (IMF dollars, yuan etc). Besides, a weak dollar creates a better environment for exports if we can ramp up our manufacturing base again.

 

Banks and governments are not going to give up their power base easily. That is obviously what will happen if fiat currencies become worthless, so IF it ever happens, you're absolutely right, it will be years away because the world powers will fight it to the very end.

 

And hedging into different eventualities is very smart considering that this is a very tenuous time in history from an economic standpoint.

 

We always think that we are in the "worst of times". I like to step back and look at the history (economically) and see all of the stuff that happened in the past that was far far worse than this. I guess the only difference in our times is that the whole world is interconnected, so it will be a global meltdown if it occurs.

[thirdgreenham]

Is there any truth to the possiblity of a North American Union between Canada/USA/Mexico and a common currency (Amero) for these three countries?

 

Some folks "predict" that the US gov't will purposely crash the USD and introduce the Amero as the saving grace.

 

Thoughts?

 

Andy

[fantastic_four]

Is there any truth to the possiblity of a North American Union between Canada/USA/Mexico and a common currency (Amero) for these three countries?

 

Some folks "predict" that the US gov't will purposely crash the USD and introduce the Amero as the saving grace.

 

Thoughts?

 

Screw the Amero and skip straight to the Eartho. Better idea than being derivative of the Euro.

[bronze_rules]

Some food for thought:

 

It's true that a ballooning stock of money relative to available goods and services could be inflationary. But only if it is used to increase the total amount of credit. That's not happening. Through the first five years of the Great Depression, the monetary base also expanded strongly, but its robust growth did not end the deflation, nor did it lead to a runaway inflationary surge after the deflation ran its course. Here again, monetary authorities are pulling out the stops. But it cannot override the caution that is causing people to cut back.

 

By the way, for those of you who are still hung up on money growth, M2 growth just went negative. Seriously, everything that the inflationistas claim should be happening simply isn't happening. For the most part, prices are not going up, in fact, they are falling. Consumers are saving, not spending, quite the opposite of how one acts in an inflation. M2 is falling, not growing. Consumer credit is falling, not growing. Gold has been firm and the dollar has been soft, but neither has surpassed its 2008 high or low, respectively, and both look ripe for a correction. T-bill rates are almost zero and Treasury bond yields are near historical lows. When are people going to stop grasping at inflationary straws and actually try to reconcile their views with what is empirically going on in the real world?

 

It is undeniable that we are gripped in a debt-deflationary spiral now. At some point in the future we may have an inflation problem as the authorities try to unwind all the measures they took to save the financial system. Personally, I think that is the more likely case, but the experiences of the U.S. in the 1930s and Japan since 1990 indicate that we should keep an open mind. In any case, I think those betting heavily now for a future inflation are likely to experience some deflationary pain first.

 

Well thought out. Not sure that deflation is a certainty, but certainly a good argument.

Keep in mind, certain economic prognosticators predicted the great depression in 1990, and many deflationary books in 2003, many such well thought out assertions were proven wrong. Also, last I checked the dollar took out a major decade long support level (08?). There has been a lot of talk about driving the dollar into the ground, and new currencies being planned. Still waiting for my health insurance premium increases to show signs of deflation.

 

There is also a lot of talk about China becoming the next superpower (they have plenty of US dollars, becoming a world creditor). I know it sounds a bit left field, but without expanding too much on details, I get this feeling we just might witness another big war within our lifetimes.

 

Everything is cyclical, and as Cadbury might quip, by jove, it's been awhile....

[delekkerste]

Some folks "predict" that the US gov't will purposely crash the USD and introduce the Amero as the saving grace.

 

Beyond ridiculous.

 

http://www.snopes.com/politics/business/amerocoin.asp

[Hedge Collector]

But isn't it fascinating that we are fast approaching 30 Million unemployed and underemployed people in this country, yet certain comics are still setting record prices.

 

I am not one to fall for the asset shift that money went from the stock market to our hobby. It sounds good in theory, but I've never heard of anyone with that mindset. In fact, I found the opposite to be true, in that I know of a few that spent less on books because they had lost so much in the market.

 

I am in the deflation camp. But I'm intrigued that we haven't had any significant correction in value in the high grade books.

 

I don't buy that high grade books hold their value because of the supply/demand imbalance or their perceived premium. The high end art market took a dive because of the credit crisis and recession.