Deflation Watch pt 152

michaels

I saw that chart and had to admit I didn't really like it because the rather arbitarily chosen 2006=100 I felt gave a misleading view of wether consumption was below where 'it should be'.

Re the bank deposit figures quoted later, I don't think the risk/return is the only factor draiving this, the changed regularory environmrnt requiring banks to very quickly change their asset profile means such extreme moves at the margin are required. Also all the reporting means that consumer and business sentiment is very negative thus making it hard for banks to actually lend money even if they want to - there are very competitve deals for credit card and mortgage debt available at the moment but most consumers are concentrating on paying down debt...

Generali wrote: »

A graph which isn't looking very promising for the economy.




Consumption has collapsed vs wages. It's what needs to happen in the end but it'll be painful for a while as people pay down debt.

tomterm8

Nice to see an old favourite thread up. The irony is, more than a year later and we still seem to be in exactly the same position. If anything, it appears things are going to get worse next year compared to this year.

Generali

The money supply fell £28,800,000,000 in December, a month-on-month fall of 1.4% (seasonally adjusted) which is a year on year fall of 2.5%.

Expect another round of QE very soon.

Road_Hog

Generali wrote: »

Expect another round of QE very soon.

Whenever I read QE, I think of this Question Time animation, especially the bit at the end with Gordon Brown.

Warning, contains naughty words for those easily offended and of a sensitive disposition.

http://www.youtube.com/watch?v=RYA0DsPcbaU

Generali

BTW, I forgot to add to my previous post, the money supply using the broadest definition (M4) fell by £51,000,000,000 in 2011. This is despite an additional £75,000,000,000 of QE in 2011.

Generali

It's the time of the month again when the BoE releases M4 numbers for February.

M4 fell £39,500,000,000 in Feb, or 1.9%. That's a 3.4% fall on the year.

More QE will be the result IMHO.

ETA: I was right about the last lot of QE BTW!

michaels

So are the BoE targetting nominal gdp now?

Generali

michaels wrote: »

So are the BoE targetting nominal gdp now?

Not officially AFAIK. There was an interesting piece on FT Alphaville about how the Chancellor can change the definition of price stability at will this week though.

It's interesting (to me) how M4 is falling in the face of inflation. In real terms it's down over 7% YoY! Over the past decade M4 was rising at 5-10%pa IIRC.

sabretoothtigger

Cash as a physical is a declining prospect. I think this is why mastercard or visa as an investment is a clever thing, the velocity of money is increasing ?

M4. I guess this matches prices doubling since 1990

United Kingdom


M4 money supply of the United Kingdom 1984–2007. In thousand millions (billions) of pounds sterling.
There are just two official UK measures. M0 is referred to as the "wide monetary base" or "narrow money" and M4 is referred to as "broad money" or simply "the money supply".
M0: Cash outside Bank of England + Banks' operational deposits with Bank of England. (No longer published.)
M4: Cash outside banks (i.e. in circulation with the public and non-bank firms) + private-sector retail bank and building society deposits + Private-sector wholesale bank and building society deposits and Certificate of Deposit.[27]
There are several different definitions of money supply to reflect the differing stores of money. Due to the nature of bank deposits, especially time-restricted savings account deposits, the M4 represents the most illiquid measure of money. M0, by contrast, is the most liquid measure of the money supply

Deflation in gold very possible. Pity then USA shut down Nasa missions, this was their best bet (they did land 'Shoemaker' on it)



actually thousand billion or 1 trillion is peanuts nowadays which maybe illustrates how low the gold price is relatively ?
Eros is 200,000x more gold then has ever been mined on earth



My point is anything at all is possible but I do not think deflation in total is probable

Masomnia

Generali wrote: »

That says it all really. These banks feel this money is better serving them making €5,000,000,000 a year in interest on deposit rather than €100,000,000,000 (less defaults) in interest being used for credit card lending.

Time for negative deposit rates?