Skip to comments.World risks deflationary shock as BRICS puncture credit bubbles
Posted on 02/02/2014 10:20:06 PM PST by Olog-hai
Half the world economy is one accident away from a deflation trap. The International Monetary Fund says the probability may now be as high as 20 percent.
It is a remarkable state of affairs that the G2 monetary superpowersthe US and Chinashould both be tightening into such a 20 percent risk, though no doubt they have concluded that asset bubbles are becoming an even bigger danger.
We need to be extremely vigilant, said the IMFs Christine Lagarde in Davos. The deflation risk is what would occur if there was a shock to those economies now at low inflation rates, way below target. I dont think anyone can dispute that in the eurozone, inflation is way below target. [ ]
The World Bank warns in its latest reportCapital Flows and Risks in Developing Countriesthat the withdrawal of stimulus by the US Federal Reserve could throw a curveball at the international system.
(Excerpt) Read more at telegraph.co.uk ...
The Fat-Cats scream as the Fed tapers away their QE handouts...
In a way, but with deflation can also come devaluation of goods, which would cause the real problem called “deflationary spiral” where the real value of debt skyrockets and production is discouraged.
Don’t be in debt during deflation. The debt doesn’t deflate, but your income, and your ability to pay it will. Otherwise, deflation can be good, if you can keep your income up past the rate of deflation.
In layman's terms, yes; realistically, no.
There's a term, biflation, which has been coined to describe simultaneous inflation and deflation.
A better opposite of inflation would probably be market crashes (like the housing bubble) which are corrections on inflated items [in the example's case housing].
(A better opposite of deflation would probably be [legitimate/full-economy] market growth; which would represent the strengthening of an economy.)
So does deflation mean my money will buy more? If so, bring it on.
The bad thing is that anyone who owns a business is always losing money. They buy their inventory at the beginning of the month and by the end of the month the value of their inventory is down, so they have to lower prices.
You may have less money to spend, because everybody will be cutting wages or pensions to keep solvent.
Except for government workers - they will likely get a fat raise.. they will be smiling with no worries at all..
The sadistic workers at the EPA will use the chance to accelerate more destructive regs.
If you have plenty of money saved, and no debt, you’re okay. And if you maintain the same income, you’re okay.
If you lose your job, though...
Yes, most products become cheaper to buy. It is good for those with jobs and savings. Not so good for stock holders. It will hurt the top 1% the most.
I have huge respect for Ambrose.
But his obsession with deflation is so bizarre I barely know how to respond to it.
Perhaps in the Euro zone it is a little more tricky because they really don’t have an independent Central Bank.
But in the USA and Japan, monetary policy has not been artificially tight for decades, and any price declines represent supply and demand issues, not monetary policy.
What's the probability of a 4th int'l banker being "found dead" this week?
...the US is printing trillions and trillions of dollars and they’re worried about deflation?
That doesn’t make any sense.
Ah, obama would love that.
The world's economy is growing, and that requires more money to facilitate exchange of goods and services. The USA is acting as the world's bank. Such a bank can print money, but there still will be deflation, as long as the rate of printing is lower than the demand.
Just wonder if we will have enough rope for all the Free Trader Conmunist Globalists who push this One World stupidity
Deflation = the price of everyday things like food and heating/cooling still goes up.
Sure. Because the bottom 99% are sitting on cash and aren’t in debt.
hm.. never thought much about deflation... wouldn’t people making minimum wage do good then in a deflationary environment? the cost of everything they buy would go down but their salaries would stay up?
If they're available and if the quality is the same.
Dell layoffs this week: 15,000 to be hit: report
Summary: Insiders say that Dell’s anticipated layoff programme will begin this week, with roughly 15,000 employees due for the chop.
In general usage they refer to rising or falling costs of goods and services. Originally they meant what was happening to the size of the money supply.
I read the guys arguing about it over on Minyanville.com, and I can't for the life of me figure it out, whether we're deflationary or inflationary; but the biggest deflationist over there, Mike Shedlock, doesn't explain why, if we're in a deflationary environment, prices are going up. He and the deflationists insist on a definition of inflation/deflation that is couched solely in terms of the monetary aggregates -- M1, M2, M3 -- and does not reflect what people (as opposed to experts) normally think of as inflation, viz., price inflation.
They insist that price inflation does not = inflation, only M2/M3 inflation = inflation.
They suggest then that price inflation is now delinked from monetary inflation. Which helps a whole lot, guys -- thanks for nothing!!!
Uh.... deflation is to inflation what global warming is to climate change.
About the same as our President giving weapons to our enemies.
"The apparent suicide death of the chief economist of a US investment house brings the number of financial workers who have died allegedly by their own hand to four in the last week."
Yeah that sounds like some real three card monty there.
The thing about monetary inflation is that yes it will create inflation, but where? Sometimes it’s in wages and then prices, sometimes going to speculating in commodities or financials, sometimes it gets exported like we’ve been doing for a long long time, then gets recycled back into the stock and bond markets, like the Chinese have done.
You weren’t seeing it in prices from wages to consumers in the US because foreign competition has been keeping wages and prices down, as was technology and now debt levels. That’s shifting now as China is driving quite a bit of inflation as they suck up commodities trying to do something tangible with all those unwanted dollars and US financial instruments.
Call it boomerang inflation if you will, plus a good chunk is just from commodity speculation as brokers and traders have no where to put it and they bank on China to continue to be a commodity draw, fueling a vicious cycle and race to plug excess dollars into a hole somewhere.
Thing is, we might see a situation of deflation and inflation at the same time as our long term debt and dollar printing binge is going to collapse on us and trigger a world deflationary recession. Yet because we are the reserve currency that all world commodities are denominated in, those dollars some day are going to get dumped completely, and commodities in our terms will soar while financial and non-tangible assets (and your job) fritter away to nothing, and you have both at the same time.
HOLY CRAP! I was sort of kidding. This is getting really nuts.
It would appear that those four bankers had an EXIT PLAN.