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World risks deflationary shock as BRICS puncture credit bubbles
Daily Telegraph (UK) ^ | 9:11PM GMT 29 Jan 2014 | Ambrose Evans-Pritchard

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 superpowers—the US and China—should 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 IMF’s 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 don’t think anyone can dispute that in the eurozone, inflation is way below target.” […]

The World Bank warns in its latest report—Capital Flows and Risks in Developing Countries—that the withdrawal of stimulus by the US Federal Reserve could throw a “curveball” at the international system. …

(Excerpt) Read more at telegraph.co.uk ...


TOPICS: Business/Economy; Editorial; Foreign Affairs; News/Current Events
KEYWORDS: economy

1 posted on 02/02/2014 10:20:06 PM PST by Olog-hai
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To: Olog-hai
In layman's terms, is deflation the opposite of inflation?
2 posted on 02/02/2014 10:28:30 PM PST by deadrock (I am someone else.)
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To: Olog-hai

The Fat-Cats scream as the Fed tapers away their QE handouts...


3 posted on 02/02/2014 10:28:41 PM PST by Southack (The one thing preppers need from the 1st World? http://tinyurl.com/ktfwljc .)
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To: deadrock

Yep.


4 posted on 02/02/2014 10:30:11 PM PST by Free Vulcan (Vote Republican! You can vote Democrat when you're dead...)
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To: deadrock

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.


5 posted on 02/02/2014 10:35:30 PM PST by Olog-hai
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To: deadrock

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.


6 posted on 02/02/2014 10:38:57 PM PST by Vince Ferrer
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To: deadrock
In layman's terms, is deflation the opposite of inflation?

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.)

7 posted on 02/02/2014 10:40:49 PM PST by OneWingedShark (Q: Why am I here? A: To do Justly, to love mercy, and to walk humbly with my God.)
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To: deadrock

So does deflation mean my money will buy more? If so, bring it on.


8 posted on 02/02/2014 10:45:46 PM PST by fella ("As it was before Noah so shall it be again,")
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To: Vince Ferrer

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.


9 posted on 02/02/2014 10:52:39 PM PST by LukeL
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To: fella

You may have less money to spend, because everybody will be cutting wages or pensions to keep solvent.


10 posted on 02/02/2014 10:55:51 PM PST by Jonty30 (What Islam and secularism have in common is that they are both death cults)
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To: Jonty30
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.

11 posted on 02/02/2014 11:15:05 PM PST by sand88 (We can never legislate our way back to Liberty)
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To: fella

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...


12 posted on 02/02/2014 11:22:50 PM PST by Arthur McGowan
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To: deadrock

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.


13 posted on 02/02/2014 11:30:15 PM PST by entropy12 (If you did not vote, you helped elect the community organizer from south side of Chicago.)
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To: Olog-hai

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.


14 posted on 02/02/2014 11:42:00 PM PST by zeestephen
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To: Olog-hai
The International Monetary Fund says the probability may now be as high as 20 percent.

What's the probability of a 4th int'l banker being "found dead" this week?

15 posted on 02/02/2014 11:42:13 PM PST by AuditTheFed
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To: Olog-hai

...the US is printing trillions and trillions of dollars and they’re worried about deflation?

That doesn’t make any sense.


16 posted on 02/03/2014 12:36:43 AM PST by Tzimisce
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To: entropy12
It will hurt the top 1% the most.

Ah, obama would love that.

17 posted on 02/03/2014 2:21:21 AM PST by Right Wing Assault
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To: Tzimisce
...the US is printing trillions and trillions of dollars and they’re worried about deflation? That doesn’t make any sense.

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.

18 posted on 02/03/2014 2:26:46 AM PST by Greysard
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To: Olog-hai; All

Just wonder if we will have enough rope for all the Free Trader Conmunist Globalists who push this One World stupidity


19 posted on 02/03/2014 3:00:16 AM PST by SeminoleCounty (A Theory is not a Fact....It is not called the "Fact of Evolution")
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To: Olog-hai

Deflation = the price of everyday things like food and heating/cooling still goes up.


20 posted on 02/03/2014 3:33:16 AM PST by glorgau
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To: entropy12

Sure. Because the bottom 99% are sitting on cash and aren’t in debt.


21 posted on 02/03/2014 5:02:03 AM PST by Kozak ("Send them back your fierce defiance! Stamp upon the cursed alliance! To arms, to arms in Dixie!)
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To: Vince Ferrer

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?


22 posted on 02/03/2014 5:16:31 AM PST by TexasFreeper2009 (Obama lied .. the economy died.)
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To: entropy12
most products become cheaper to buy

If they're available and if the quality is the same.

23 posted on 02/03/2014 5:22:24 AM PST by grania
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To: Olog-hai

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.
Charlie Osborne

http://www.zdnet.com/dell-layoffs-this-week-15000-to-be-hit-report-7000025879/


24 posted on 02/03/2014 7:30:45 AM PST by KeyLargo
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To: deadrock

Yes.


25 posted on 02/03/2014 8:38:28 AM PST by Georgia Girl 2 (The only purpose of a pistol is to fight your way back to the rifle you should never have dropped.)
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To: deadrock

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.


26 posted on 02/03/2014 11:27:41 AM PST by hinckley buzzard
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To: deadrock; Free Vulcan
In layman's terms, is deflation the opposite of inflation?

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!!!

27 posted on 02/03/2014 6:15:33 PM PST by lentulusgracchus
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To: deadrock
In layman's terms, is deflation the opposite of inflation?

Uh.... deflation is to inflation what global warming is to climate change.

28 posted on 02/03/2014 8:57:55 PM PST by UCANSEE2 (I forgot what my tagline was supposed to say)
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To: AuditTheFed
What's the probability of a 4th int'l banker being "found dead" this week?

About the same as our President giving weapons to our enemies.

Financial world shaken by 4 bankers' apparent suicides in a week

"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."

29 posted on 02/03/2014 9:02:58 PM PST by UCANSEE2 (I forgot what my tagline was supposed to say)
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To: lentulusgracchus

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.


30 posted on 02/04/2014 7:35:10 AM PST by Free Vulcan (Vote Republican! You can vote Democrat when you're dead...)
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To: Southack

Yep.


31 posted on 02/04/2014 9:08:02 AM PST by 1010RD (First, Do No Harm)
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To: UCANSEE2
Financial world shaken by 4 bankers' apparent suicides in a week

HOLY CRAP! I was sort of kidding. This is getting really nuts.

32 posted on 02/05/2014 8:48:46 PM PST by AuditTheFed
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To: AuditTheFed

It would appear that those four bankers had an EXIT PLAN.


33 posted on 02/05/2014 9:27:00 PM PST by UCANSEE2 (I forgot what my tagline was supposed to say)
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