Inflation figures

WTF?_2

dopester wrote: »

Hello... even Gordy has now admitted we have the problem of deflation ahead.

Deflation is going to be very bad for people with debt. As inflation gradually wipes away debt away for debtors.... deflation is going to magnify people's debts the other way around.

DEFLATION. Remember the word. It will be the downfall of so many.

I know we're going round in circles here, but don't count on deflation lasting.

We are seeing massive measures to 'counter deflation'. Right now, the market is still deflating somewhat but at some stage all that cash and liquidity that has been pumped in is going to manifest itself.

Check this link:

http://www.bloomberg.com/apps/news?pid=20601087&sid=abYTR9BqGlBo&refer=worldwide

"quantitative easing" ... i.e. a policy of printing money, essentially.

The banks are being stuffed with cash, which they are currently (mostly) holding on to as they have dodgy balance sheets and the markets are bearish, hence lending is risky. However, once the logjam clears we are going to see an explosion of credit. At that point, get ready to watch the markets (stock, housing, commodities - everything) absolutely rocket with all the excess money being dumped into them. That will also signal by the way that personal savings are being shredded away, meaning even more money will be going into the markets from that source. I'd look for a bottoming in the US housing market as the signal.


Basically, the strategy seems to pump more and more cash into the system until something gives. It cannot be stressed enough, the governments cannot afford deflation and since they hold the power to 'run the printing presses' it will not be allowed to progress. They will get more and more desperate until they succeed in creating inflation - and since there isn't the real product to back all the freshly created money, that means trouble.

Really2

Acording to the BOE minuets they were thinking of making a larger cut to combat defaltion.

2.5% or below will be happening very soon, the only reason they did not make a bigger cut as they thought it would be too big a shock to the system.

WTF?_2

Really2 wrote: »

Acording to the BOE minuets they were thinking of making a larger cut to combat defaltion.

2.5% or below will be happening very soon, the only reason they did not make a bigger cut as they thought it would be too big a shock to the system.

Well, devaluing the currency is a form of de-facto inflation - you are 'importing inflation' because your imports will cost relatively more the weaker the pound gets.

Unfortunately, simply making imported stuff more expensive than it otherwise would have been isn't really going to get to the nub of monetary deflation (caused by unwillingness of lenders to lend) even though it should certainly apply upward pressure on CPI.

Is it wise to go the devaluation route in an economy so biased towards imports? Time will tell. I think they are betting that other major currencies will also devalue/inflate so in the grand scheme of things they can get away with it and reap the benefits of cheaper borrowing without the currency being completely wiped off the map.

I'm pretty certain the Euro is going to get a battering in the near future (how it has survived so long with all the bad european fundamentals is a mystery) and by rights the dollar should be toilet paper by now. However if we see the 'flight to GDP' occuring in the markets again then Sterling is going to be in a bad position given the outlook.

StevieJ

!!!!!!? wrote: »

I know we're going round in circles here, but don't count on deflation lasting.

We are seeing massive measures to 'counter deflation'. Right now, the market is still deflating somewhat but at some stage all that cash and liquidity that has been pumped in is going to manifest itself.

Check this link:

http://www.bloomberg.com/apps/news?pid=20601087&sid=abYTR9BqGlBo&refer=worldwide

"quantitative easing" ... i.e. a policy of printing money, essentially.

The banks are being stuffed with cash, which they are currently (mostly) holding on to as they have dodgy balance sheets and the markets are bearish, hence lending is risky. However, once the logjam clears we are going to see an explosion of credit. At that point, get ready to watch the markets (stock, housing, commodities - everything) absolutely rocket with all the excess money being dumped into them. That will also signal by the way that personal savings are being shredded away, meaning even more money will be going into the markets from that source. I'd look for a bottoming in the US housing market as the signal.


Basically, the strategy seems to pump more and more cash into the system until something gives. It cannot be stressed enough, the governments cannot afford deflation and since they hold the power to 'run the printing presses' it will not be allowed to progress. They will get more and more desperate until they succeed in creating inflation - and since there isn't the real product to back all the freshly created money, that means trouble.

I will be honest !!!!!!, I think that is the only thing I have ever agreed with you on, but even so I think you were late to the deflation view.
In my view deflation is being fought that strongly it will happen short term anyway (e.g. over the next 12 months) but then we will see a bounce in all things inflationary, after the deflation threat dissipates and counter deflationary policies take hold.

setmefree2

dopester wrote: »

Hello... even Gordy has now admitted we have the problem of deflation ahead.

Deflation is going to be very bad for people with debt. As inflation gradually wipes away debt away for debtors.... deflation is going to magnify people's debts the other way around.

DEFLATION. Remember the word. It will be the downfall of so many.

Hopefully there won't be any deflation in the end, which is why the BOE reduced interest rates and the pound has been allowed to fall. Hopefully by mid next year we will have mild inflation - hell I don't even mind if it's 5% god willing....

setmefree2

!!!!!!? wrote: »

I know we're going round in circles here, but don't count on deflation lasting.

We are seeing massive measures to 'counter deflation'. Right now, the market is still deflating somewhat but at some stage all that cash and liquidity that has been pumped in is going to manifest itself.

and the the BOE will raise interest rates.

setmefree2

!!!!!!? wrote: »

I think they are betting that other major currencies will also devalue/inflate so in the grand scheme of things they can get away with it

That would look like a dead cert since we are all in the same boat.

WTF?_2

StevieJ wrote: »

I will be honest !!!!!!, I think that is the only thing I have ever agreed with you on, but even so I think you were late to the deflation view.
In my view deflation is being fought that strongly it will happen short term anyway (e.g. over the next 12 months) but then we will see a bounce in all things inflationary, after the deflation threat dissipates and counter deflationary policies take hold.

More than a bounce. It will rocket.

The trick is figuring out when and shifting cash into useful assets either before it happens or early on.

StevieJ

!!!!!!? wrote: »

More than a bounce. It will rocket.

The trick is figuring out when and shifting cash into useful assets either before it happens or early on.

Now is as good a time as any.

WTF?_2

setmefree2 wrote: »

and the the BOE will raise interest rates.

Given the authorities reluctant record on this, I doubt that it will be done properly.

An inflationary bounce will be hailed as yet another miracle move by the politicians, no-one will be in a hurry to dampen down the party and we'll be off on another rollercoaster ride.

Still, anyone considering taking on an overpriced tracker right now would be well advised to bear in mind that rates will rise in a couple of years.