Take your pick of poison. Maybe we have a little of this, a little of that. Or maybe just some of that. Or maybe we'll have some of that after we have some of this?
It would appear to the naked eye that we're seeing significant deflation in hard illiquid asset prices - gold, silver, oil, houses - as people rush to cash. We're seeing inflation in living consumables - health care, orange juice, dry cleaning, movie tickets, tomatoes you name it.
Indeflation? Deinflation? What the heck do we call this monster?
Here's an interesting read at Financial Sense addressing this very conundrum.
About this time, when some aspect of the economy is in trouble, the deflationists come out of the wood work with the equivalent of sticker shock “catch phrases” and “hunker in the bunker” ideologies. This will cause those who are just getting interested in commodities to develop a case of the jitters and bail. In Science, failure to look for the root cause of a problem rather than symptoms leads to an improper diagnosis and this just as true in the financial markets. I am writing this for those considering investments in the commodity arena performing the required due diligence.
The amount of money floating around is the key to inflation, whether it is derived from printing or issuance of credit. An increase in money supply drives inflation i.e. more money chasing the same number of goods. With all of the money churning around the globe, it must have a certain velocity to keep the economies of the globe flowing smoothly. A substantial decrease in velocity of money results in lower economic activity, which results in fewer jobs, less demand for commodities, etc. i.e. recession.
Increasing house prices through irresponsible credit availability will require more money printing to compensate for stalling velocity in time. Inflation normally has rising interest rates to compensate investment interests (banks must charge more than inflation rates in order to make money). Since the US housing market is where most individuals concentrate net worth, the FED must keep rates as low as possible until many of the newer adjustable mortgages get reset over the next year. Artificially low interest rates create a negative real return, which bolsters the price of precious metals.
In the end, there will be a deflationary collapse following the current period of inflation and it will be due to a zero velocity of money compounded with plummeting manufacturing output. At this point in the future, owning cash and bullion will be important.
October 07, 2006
Inflation? Deflation? Recession? Depression? Tomato? Tomato?
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44 comments:
Housing Bubble is ahead of all other blogs. . .while they are still discussing housing meltdown, we all have moved (thanks to Keith)to the next level - what the hell is happening to the economy. . .late here in Zurich - just finished a nice dinner at Zeughauskeller (many American there). . .Actually, after talking with my Swiss friends, none of us has a clue as to why the Dow 30 is climbing while the US economy is melting down. Inverted yield curve for over 3 months (history tells us 100% chance of recession) Americans broke, yet dollar is going up (hey, my CH Franc is now down to 79 cents). . .gold down, oil down . . .they only thing I have read that makes any sense is that hot money has left gold, oil, real estate, and is in the blue chips. . .this is temporary I would think. I agree in general - hot money is going to cash, and velocity will decline.
I can confidently predict there will be a 100% inflation rate in Keith's prostate gland as he ages and turns into a fat old worthless wart on society.
Second thoughts before turning in here in Zurich. . .I am 56, have always been ahead of the curve as far as baby boomers - whatever I did, my friends did it a few years later - buy a house, etc. I have cashed out of real estate, sold most of my stocks except blue chips, and am sitting on cash in Muni Bonds. . .so. . .maybe the author has a point - people will put money in cash and then the economy will deflate. . .just a thought.
direct correlation as realtor trolls go up housing prices go down
mark in sd - aren't you supposed to be in sd?
give me one travel tip for zurich
Stuck between a gold rock and a hard cash place.
Jeudi said...
fat old worthless wart on society.
------------------
If you are going to describe yourself..at least lie about it. sheesh have a little dignity.
Convulsions.
That's what it will be.
Economic convulsions.
Whereby waves of debt default and asset destruction will be met by equal-and-greater waves of liquidity, new debt issuance, debt forgiveness, derivatives shuffling, central banking intervention, government interference in normal market processes, and all manner of shenanigans.
This process will take several years, to as much as five or more.
Of course, should China and the U.S. get into any trade/currency/military confrontation, or there is any oil shock, or other major confrontation (say, between the U.S. and Iran and/or N. Korea), then all bets are off.
In the meantime, attempt to protect yourself by having some cash OUTSIDE the banking system, some gold coins, some silver coins, a few guns, ammo, food, water, a good-running vehicle with a full tank of gas at all times, and be certain to monitor events carefully via the Internet and news sources.
However, I am still not terribly optimistic for the outlook in the U.S. due to the enormous debt, the corrupt monetary system (including the afore-mentioned derivatives scams) and the constant erosion of our few remaining civil liberties.
Have any of you read the new guide lines for mortgages.
http://tinyurl.com/jyy55
good read
For all nontraditional mortgage loan products, an institution's analysis of a borrower's repayment capacity should include an evaluation of their ability to repay the debt by final maturity at the fully indexed rate, assuming a fully amortizing repayment schedule. In addition, for products that permit negative amortization, the repayment analysis should be based upon the initial loan amount plus any balance increase that may accrue from the negative amortization provision.
All of you who have been sitting on the sidelines with your cash have missed a very nice run up in the stock market. Blog host predicted Dow 8000 by the end of the year......seems to be a bit off and he has lost a ton of money because of it. I hope he still doesnt have Jan 07 put options on Dow 8000.
This blog is still pretty good though.....convinced me to sell my two rental homes last Dec and have put proceeds into Dow companies.....biggest winner is GM.
thx
"or there is any oil shock, or other major confrontation (say, between the U.S. and Iran and/or N. Korea), then all bets are off."
that's interesting
"some gold coins, some silver coins, a few guns, ammo, food, water, a good-running vehicle with a full tank of gas at all times"
another interesting comment.
"Blog host predicted Dow 8000 by the end of the year......"
the blog host is a racist
he's not a racist.....unless you consider ignorance about picking stocks racist
By definition, deflation is a decrease in the money supply. Economists who continue to follow M3 (using govt numbers to recreate it) say it's growing. M3 growth through July averaged 8.3%, but in August they pumped it up even higher to an annualized rate of over 10%! There is no deflation and the Fed has the valve wide open on money creation. Pedal to the metal.
This flies in the face of Keith's drumbeat about an impending HP and collapse of the RE market. Ain't gonna happen because the Fed and other central banks around the world are working like hell to avert it.
The following are ALL idiotic statements:
Housing Always Goes Up
We are headed for Deflation
Gold is in them thar Hills
Cash is King
Guys, I hate to sound like an "anti-semite" here, but if you want to see the future, just take a look at the past. In every single nation where the jews have taken power, they have laid financial waste to that nation. In pre third reich Germany, they completely gutted the economy, Hitler was just a response to what the jews had done to his people and nation. This is NOT a unique case. They did the same thing in the communist soviet jewnion, and about eighty other nations and empires throughout recorded history. This is just the end cycle of a jewish parasitic take over of a nation.
now that was racist
Well, if the truth is "racist", then I guess that was racist.
hebrew house lender said...
"Well, if the truth is "racist", then I guess that was racist."
No, your pseudotruth--in this case a grotesque exaggeration that omits contrary facts--is bigoted. Your idiotic comments are astounding. For every wrong you might want to blame on Jews, I can find a right you don't want to acknowledge. If you erased the Jews from the Earth, we would be living in caves. You sound like the Christians and Muslims who want gays eradicated, which would also leave everyone else living in caves.
hebrew house lender said, you hate to sound like an anti-semite?
Got some news for ya, i've seen and read your rantings....you are a anti-semite racist nazi!
hebrew house lender is probably a gullible bully, desperate for a scapegoat, like other anti-Semites are. Chances are not bad for more prosperity, because things aren't as bad as gloom and doom salesmen would have you believe.
hebrew house lender -you are nazi and bigot
hebrew house lender said...
WELL SAID!
Deflation, yes!
Bring. It. On.
Anon 4:10 said, " For every wrong you blame on the jews, I can find a right you don't want to acknowledge."
Yes, You brain washed and brain dead lemmings are just pointing out facts left and right here. Geez, I can't keep up with all the credible facts coming forth!
Oh yes, and with out jews and gays, we would all be doomed I'm sure! No more usury interest, no more fab five! We may as well revert back to the stone age!
hebrew house lender said...
"Oh yes, and with out jews and gays, we would all be doomed I'm sure! No more usury interest, no more fab five! We may as well revert back to the stone age!"
How about an 80% reduction in scientific discoveries, and a 90% reduction in anything remotely artistic or beautiful. Do really want to buy furniture designed by straight baptist farmers (or how about Shakers)? Do you actually think most women would look good if they didn't have makeup, clothes, hairstyles, and all the rest created by gays? Hell, do you think men would? How about a world without television, movies, art, paint colors, car styles, nice clothes, ceramics, or Bowflex exercise equipment? If you want to see what a world without gays and Jews is like, try visiting your favorite KKK survivalist training camp.
"If you erased the Jews from the Earth, we would be living in caves. "
Yeah, right, gentiles couldn't build shelter. I guess the ancestors of KB and Toll built Europe's cathedrals, too.
Anonymous said...
"Yeah, right, gentiles couldn't build shelter. I guess the ancestors of KB and Toll built Europe's cathedrals, too."
Actually, they did. Jews and pagans built many of the great cathedrals of Europe, a chore later taken over by Masons. Also keep in mind that many of the greatest architects, painters, and artists were gays or Jews (or both), and often persecuted for it. Go to Iraq or Iran to see what straight, non-Jewish "artisans" are good at. Did the term "manmade caves" come to mind? How about "outdoor pumbing?"
"Go to Iraq or Iran to see what straight, non-Jewish "artisans" are good at." In Iraq, the architecture is obscured by what the neocons "are good at", meddling and destruction. "Greatest" Jewish painters? Gays (Michelangelo?)are represented, I agree, but no Jewish "greats" come to mind. Not sure about architects, but certainly the greatest mathmatical minds were Christian.
Why can't the Jewish geniuses run a teeny little country without billions in US aid and meddling in US foreign policy?
Anonymous said...
"In Iraq, the architecture is obscured by what the neocons 'are good at', meddling and destruction. 'Greatest' Jewish painters? Gays (Michelangelo?)are represented, I agree, but no Jewish 'greats' come to mind. Not sure about architects, but certainly the greatest mathmatical minds were Christian."
Here are some links that should open your eyes to some of the significant contributions of Jews:
(mathematics)
http://tinyurl.com/mevcg
(music)
http://tinyurl.com/l9ljp
(philosophy)
http://tinyurl.com/pnhwu
(literature)
http://tinyurl.com/qrxjn
(medicine)
http://tinyurl.com/pg895
(chemistry)
http://tinyurl.com/ld9vl
(physics)
http://tinyurl.com/pr6bq
If you can find any other similar-sized group on Earth that has comparable achievements, you too might qualify for a Nobel prize. As for your claim that Christians have had best minds in math, try this one, too:
http://tinyurl.com/nrhsw
Yes, there is a Jewish gene bank that keeps their average IQs way out on right side of the bell curve.
But what the fu*k does that have to do with the subject of this thread?
The formative minds in mathmatics were Christian, pre-Nobel by centuries. Einstein built on the foundation of Riemann. The very idea of the university was born of Christian Europe, so to say without Jews that others would be backward is assinine. I won't enter a Nobel pi**ing contest, that's been debated to death. The Jews have done well in Christian nations- as do Iraqis and others - but their own, like the Arabs, is dysfunctional. Had Iraqis entered the Western countries (en masse to Europe, to US later) as the Jews had, they would have similarly benefitted and thrived. The same for Iranians (who are brilliant and done OK despite constraints of Islamic theocracy) Funny that Iraq & Iran were given as examples of how impoverished the West would be sans Jews. Funny, these countries cited just happen to top the neocon hit list. (see "A Clean Break: A New Strategy for Securing the Realm" )
Sorry, I did de-rail, but was responding to an inane earlier post. I detest ethnic superiority BS whether LaRaza or Talmud-driven, and couldn't refrain.
BTW, there's an environmental componant to IQ, as well.
Get over it. The previous letter was in response to the bigoted anti-Semetic crap posted earlier, and had you bothered following the threat back, you would have discovered this.
The Christian cultures you think so highly of were so filthy, MOST European Christians before the 19th century rarely if ever bathed in their entire lives. It wasn't until the 1920s that Americans (not Europeans) hit on the idea of regular bathing, something Native Americans had been doing for a thousand years.
Iran and Iraq were mentioned, because they are two most prominent Muslim countries at present; it has nothing to do with neocons.
Given the miserable living conditions of European Jews from the early days of the Papal, and later Spanish, Inquisitions, I would say that if your theory were correct, Muslims would have discovered indoor plumbing and toilet paper by now.
RE Muslims and toilets:
The Moores who civilized Spain had running water and indoor toilets. I believe the Moores were very Muslim.
RE Einstein and Jews:
Sorry, Reinman was a clever mathematician, but Einstein's main influence for his greatest work was Ernst Mach. Mach's parents were Jewish, but later became Protestant.
"The Moores who civilized Spain had running water and indoor toilets. I believe the Moores were very Muslim."
Romans were into plumbing about 1000 years prior to the Moorish invasion of Spain!!
Hey historians out there, Rome and Persia were empires long before the advent of Islam.
So when the Caliphate of Babylon ripped off the Ptolemic Egyptians, the Zoroastrian Persians, and the former Berber Romans of their innovations, the so-called golden age of Islam was born, a.k.a the greatest plagarism of all time. So please don't confuse the classical age of antiquity with the rise of Islamic mullahs.
Anonymous said...
"RE Muslims and toilets:
"The Moores who civilized Spain had running water and indoor toilets. I believe the Moores were very Muslim."
Who cares? They forgot this bit of technology in a heartbeat, didn't they? When Muslims and their supporters bring up ancient history to prove how smart Muslims are, they make absolute idiots of themselves. The fact is, Middle Eastern countries became infinitely worse after the arrival of Islam, and they've been retrogressing ever since. Try checking out all the beheading videos Muslim fanatics happily post on the Internet for the whole world to see. Incidentally, Osama wipes with his bare hand, as do most fundamentalist Muslims; they even designate a "wiping hand" and an "eating hand." Indoor toilets? One can only imagine the horror THAT involved.
Currently in Iran Christians must wear a badge as an indentity communicator, so then the Islam pupolation may avoid the Christian Infidels when in Public.
"Einstein's main influence for his greatest work was Ernst Mach."
Poincare and Lorentz were big influences on Einstein, who was more synthesizer than originator.
Ever heard of De Pretto?
"Olinto De Pretto, an industrialist from Vicenza, published the equation E=mc2 in a scientific magazine, Atte, in 1903, said Umberto Bartocci, a mathematical historian.
Einstein allegedly used De Pretto's insight in a major paper published in 1905, but De Pretto was never acclaimed, said Professor Bartocci of the University of Perugia. "
:Currently in Iran Christians must wear a badge as an indentity communicator
The Islamic Republic of Iran has no right to call itself Persian, the preceding ancient civilization which actually went beyond Hammurabi's code with Cyrus the Great. Instead, it should simply be called Shia Arabia so that between it and the mothership in Saudi, there's no confusion as to its real message.
The real modern day Persians are the Russian citizens in Ossetia (descended from ancient Persians with a similar language) whose children were taken hostage by those Chechen rebels in the Beslan school shooting.
COPPER PLUMBING PRICES WENT SKY HIGH, MAYBE MANIPULATE THE PRICE OF ZINK IN THE PENNY, THEY STILL USE IT FOR HEAVY, STRONG METAL COMPOSITE?, 5 FOR A DOLLAR? DID YOU SAY 2 MILLION$ 2BD CONDO
COPPER PLUMBING PRICES WENT SKY HIGH, MAYBE MANIPULATE THE PRICE OF ZINK IN THE PENNY, THEY STILL USE IT FOR HEAVY, STRONG METAL COMPOSITE?, 5 FOR A DOLLAR? DID YOU SAY 2 MILLION$ 2BD CONDO
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