ECONOMIST WARNS: Deflation Is Coming To The US

BI ^ | 1-8-2015 | Shane Ferro

[blam]

Shane Ferro
January 8, 2015

Deflation is coming.

In a new note to clients, BNP Paribas's Laura Rosner writes that low oil prices could drag headline inflation in the US into negative territory in the first two quarters of 2015.

Rosner writes:

Under our new forecast, the quarterly y/y rate of headline inflation falls below zero in Q1 and Q2 2015 (-0.3% and -0.4%, respectively). We still expect the energy price shock to have only transitory effects (maximum impact in 2015) and limited pass through into core, though we will be re-evaluating that assumption over time. Our forecast assumes household and business inflation expectations remain reasonably well-anchored.

In the note, Rosner says core inflation, which strips out the more volatile costs of food and energy, is expected to be 1.8% and 1.7%, respectively, in the first two quarters of 2015. Rosner expects gas prices fell 11.2% in December.

(snip)

[blam]

DEUTSCHE BANK: 'Canada Is In Serious Trouble'

[PGR88]

Real deflation? Or is this just more propaganda from the money printers dealing in government debt who need to rob people of their wages and savings to support their scheme?

I’ve seen Hamburger for example, go from $2.99 to $5.99 in the last 6 years. Will prices for stuff I actually use decline? If so, bring it on.

[EagleUSA]

Gee, how did the USA survive when gas was $0.25 per gallon and a loaf of bread sold for $0.25 ???

Amazing how this works....

[stinkerpot65]

Deflation has been coming to the US every year since 2008. At least on the interwebs ...

[knarf]

Y'know ...

INflation is bad
DEflation is bad
and
STAGflation is bad

Why do we even bother ?

I'll trade someone 13 laying hens for a one way ticket to the Philippines ... OK ... I'll throw in the two roosters for a window seat.

[cuban leaf]

Problem is they need wages (and the national debt) to decline with it or we are in deep doo-doo.

[cuban leaf]

In a world that depends on debt fueled inflation, another word for deflation is “economic collapse”.

[cuban leaf]

In a world that depends on debt fueled inflation, another word for deflation is “economic collapse”.

Oops. That’s two words...

[nikos1121]

What would be wrong with that?

[LostInBayport]

It would be nice to read my monthly savings statement and look at the interest paid without hearing a sitcom laugh track in my head.

[arthurus]

There was mild relative deflation through the 90s. Most folks didn't notice it and it was not trumpeted in the press but people felt better and there were no major Strikes because people were feeling less pressed financially as their dollars continuously bought just a little more even as wages didn't rise in nominal terms.
It was "relative" deflation because the money supply was still increasing but general productivity was increasing faster so prices tended to decline.

[blam]

"It would be nice to read my monthly savings statement and look at the interest paid without hearing a sitcom laugh track in my head."

Something to think about....

Much of the sound-track laughter used these days are of people who died years ago

[TomGuy]

Deflation?

I noticed a couple of grocery items I bought Tuesday were up 15% and another item was up 10% over the same prices in December.

[__rvx86]

I fail to see the problem here: As a guy with low, manageable debt, substantial savings, and prospect of a steady income (I’m starting a job soon), what could go wrong with deflation?

At least my entry-level, minimum-wage job goes further to pay my way through college. (I’m studying engineering, natch)

[tcrlaf]

The $100 Trillion Reason Why Central Banks Are Terrified of Debt Deflation
http://www.zerohedge.com/news/2015-01-08/100-trillion-reason-why-central-banks-are-terrified-debt-deflation

ALL Central Banking actions of the last 6 years has been directed at just ONE thing.

Making sure the global bond bubble DOESN’T IMPLODE.

[Gen.Blather]

I just got a renter who is surrendering his house. He is so far upside down that it’s cheaper to pay me $850/month and lose his credit rating and leave his house of 16 years. What the government would like to do is prop up the “values” of overpriced property so the banks don’t get hurt. (BTW, I suspect that the forgiven mortgage will be considered income by the IRS. I told him he needs to look into that.) A friend with 25 homes told me that she has several people like him who have lost (surrendered or lost their job) their homes.

[Arthur McGowan]

I remember reading this:

“Divorce. The words hit Marsha between the eyes like a brick.”

[CWW]

Deflation is bad because it reduces the value of your assets — your home, your stocks/401K, etc.

[CWW]

Go back to college and take economics 101. It’s what lead to the Panic of 1837 and the Panic of 1873 and the recessions/depressions that followed. So deflation is a two-edged sword. Wages will also stagnate or actually decrease. Meanwhile, the debts you incurred before deflation on your mortgage or student loans remains the same.