Inflation not rising fast enough

[SoCalGardens]

Originally Posted by darwinslair

<laughing> becauce they say so, I guess. We are a monetarily soveirgn state, so we apparently can just manipulate interest rates (keep them at 0%?) which means that there isnt any inflation, because if there was, interest rates would reflect it?

And just ignore that all international commodities are going up about twice as fast as the stock market in general. The emperor is not naked. All is well. Continue about with your lives. There is nothing to see here.

Tom

Commodities are rising relative to the dollar, but I wouldn't call it (current period) inflation so much as re-adjusting the dollar to its appropriate level. For 3 decades we have exported inflation to others via a strong dollar policy.

[darwinslair]

Originally Posted by SoCalGardens

Commodities are rising relative to the dollar, but I wouldn't call it (current period) inflation so much as re-adjusting the dollar to its appropriate level. For 3 decades we have exported inflation to others via a strong dollar policy.

ok, so I am confused. This is not inflation now, this is inflation we should have had over the last 30 years, though the inflation rate (official) for the last 30 years was 178.52% (January 1980-january 2010)?

Goldman's call is for another 20% in the next 14 months, before "strong dollar policies" drop it down a bit (have we seen strong dollar policies recently or significant periods of deflation to balance things?)

Just how much inflation do we need to balance the lack of inflation in the last 30 years? (and the number I gave is adjusted by the government, which excludes......a lot)

Tom

[darwinslair]

Originally Posted by SoCalGardens

I already did. In 06 a dollar deposited in a bank was turned into ten dollars worth of mortgage loans. Those mortgage loans were resecuritized at least twice so that the one dollar printed by the government was turned into a thousand dollars through the magic of fractional reserve banking and Wall Street's securitization geniuses.

In 08 the securitization markets almost completely shut down and banks stopped lending to anyone besides USGOV. So whatever money USGOV prints, that's it. 1000 times less than it was before.

It's called a credit collapse -- a malicious cycle of loan defaults, falling asset prices and more loans defaults, followed by lay-offs, business failures and further falling asset prices.

Our system just is not designed to withstand a credit collapse -- so if you wish that, you had better be prepared to give up on private property, civil society and such. Back to "nasty, brutish and short."

Well, we bought all of those bad loans at par, paid off the derivatives at par, and all of that money now exists in the system.

On top of that, there was not a bank out there loaning money at only a 10 to 1 ratio (though it is a nice round number to use) but with no one buying homes anyway (and of those being bought by my clients, more than half are cash transactions and do not involve a bank at all) that would only explain a rise in home prices, not everything else, since few people took out loans to buy gasoline, bread, rolled oats, or silver coins.

Tom

[SoCalGardens]

Originally Posted by darwinslair

Well, we bought all of those bad loans at par, paid off the derivatives at par, and all of that money now exists in the system.

On top of that, there was not a bank out there loaning money at only a 10 to 1 ratio (though it is a nice round number to use) but with no one buying homes anyway (and of those being bought by my clients, more than half are cash transactions and do not involve a bank at all) that would only explain a rise in home prices, not everything else, since few people took out loans to buy gasoline, bread, rolled oats, or silver coins.

Tom

Well the part of the industry I was in involved turning homes into ATMs. Otherwise known as home equity lending.

But the system has definitely deleveraged, and IMO more deleveraging is coming.

[uprooted_kentuckian]

I haven't had time to catch up with you guys, but I'll stick to what I said earlier. They will create some inflation to offset deflation. They will do it every time and they are correct for doing so. So much is tied to steady or increasing costs, that a deflationary environment would prove to be nearly catastrophic. In my business, it would shut us down. Deflation has real consequences when you consider inventory credit lines, equity credit lines and so on. To think that prices work in some sort of vacuum is just wrong. The austrian scool of economics is archaic and dangerous in our current economic system.

[darwinslair]

The "deflation" (official) of last year was .34%. The inflation this year (official) is .75% through August.

Unnoficially, there was no deflation last year.

And to be honest, I wish they only included a couple of things in the inflation calculators: Raw commodities, housing, energy. Those are the only things people MUST have. The rest are extras. That the official numbers eliminate the last one, and all foods from the first, gives us a really badly skewed set of numbers to work from. When prices are falling on all the junk you dont need, the home you already have doesnt have the value it once had (but you already have it) and the cost of eating and keeping your home running are skyrocketing, to say that there is deflation, seems dishonest to me.

But they are government numbers, so what else can you expect.

Tom

[darwinslair]

http://www.cnbc.com//id/39746665

so, death of the $ by a thousand cuts?

Tom

[darwinslair]

http://noir.bloomberg.com/apps/news?...ySbhOSG0&pos=1

<laughing> so, we will all race to the bottom together, hand in hand, singing about following the yellow brick road while the lollipop guild shows us the way.

Tom

[FAADAN]

Originally Posted by darwinslair

http://noir.bloomberg.com/apps/news?...ySbhOSG0&pos=1

<laughing> so, we will all race to the bottom together, hand in hand, singing about following the yellow brick road while the lollipop guild shows us the way.

Tom

Yeah, the object of socialism is to make everyone equally poor. There is another thread on economic inequality this morning.

[darwinslair]

so, the dumping of US $s in China is causing issues apparently.

http://noir.bloomberg.com/apps/news?...d=aLd2MMl2SP44