If you doubted that inflation was on its way...

Generali

Wookster wrote: »

Really?

Lets get something clear: what exactly is deflating??

Debt is being destroyed right now, another term for that (which is jargon I admit) is debt deflation.

Wookster wrote: »

AFAIK the only thing dropping in price are houses and some equities.

That is not deflation, it is correction of asset bubbles.

When a significant quantity of the "basket of goods" constituent elements are dropping in price then we can talk of deflation but we aren't there yet.

You are right to point out that the price level isn't falling so we don't have deflation. I maintain that it is a risk.

My POV is that there are two conflicting forces at work:

- Debt deflation (that is money being destroyed as banks try to rebuild their balance sheets in the face of increasing defaults and poor previous investments) and Governments suck money out of the productive parts of economies to try to maintain spending
- Governments slashing the price of money (base rate) to record lows, printing money (not literally I know) and pushing cheap money at the banks (and then pressurising them to lend some rather than rebuilding balance sheets).

I have no idea which one of these forces will win out. I guess policy makers and Central Bankers hope they'll net out to 0. My point is that to imagine that the War on Deflation has been won and the Forces of Falling Prices routed may be premature.

PS In response to Kennyboy66 - I don't think deflation is the most likely outcome or even a likely outcome but to discount it entirely is premature at least.

Snooze

Snooze wrote: »

Hello Topov. Where is Sockpuppets when you need him? :rolleyes:

Rob

And may I suggest a name for your next alias? I think that Fukov would suit you well, especially as it rhyms with the other two!

Rob