Deflation Watch pt 153 - International Edition

Generali

It's time to take Deflation Watch onto an international stage.

My contention is that if the broad measure of the money supply falls then most often (although not always) deflation is the result.

M4 (the broadest measure of the money supply in the UK) is growing at a falling rate, but what is happening elsewhere?

Eurozone.(link)
M3 down -0.2%

USA (link)
M2 down about a fraction.
M3 is no longer officially calculated but estimated to be falling faster than at any point since the 1930s (link)


Japan(link)
Up 2.2% - actually pretty strong I think compared to recent history

tomterm8

Large segments of the eurozone are running austerity programs... and, heading for self-imposed deflation.

Many states in the US are in deflation, and has been for some time. (People make a lot of fuss about greece, but california is an economy the size of Britain, and it is bust).

It is a bit messy.

Jonbvn

Main financial article in the Torygraph today.

http://www.telegraph.co.uk/finance/economics/7769126/US-money-supply-plunges-at-1930s-pace-as-Obama-eyes-fresh-stimulus.html

The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.

I assume that this means the OECD should !!!!!!?

Like the photograph!

Generali

Jonbvn wrote: »

I assume that this means the OECD should !!!!!!?

Well probably and certainly I think the bigger risk is deflation, not inflation.

Time will tell.

purch

Deflation Watch pt 153

Shouldn't that number be pt -153 :eek:

Generali

purch wrote: »

Shouldn't that number be pt -153 :eek:

Yes it should. FWIW, I saw the article in the Torygraph and wondered about the Euro numbers. Is it just me or are the possible outcomes from here increasingly looking fking messy?

Please see the Generali T&Cs:

Disclaimer - do not expect any consistency of argument, arithmetic, logic, syntax, grammar or spelling in anything posted after 8pm local time.

They're on the website (no link now or ever).

Jonbvn

Generali wrote: »

Yes it should. FWIW, I saw the article in the Torygraph and wondered about the Euro numbers. Is it just me or are the possible outcomes from here increasingly looking fking messy?

The question that springs to mind is what as individuals should we do to offset problems related to deflation?

The first AFAIK should be pay down debt ASAP. What about others?

(Please don't tell me the gold bugs were right);)

Wookster

Can you explain what M1,M2, M3 & M4 are Generali?

I presume when you say deflation you are referring to falling asset prices rather than other goods and services (which are rising per the CPI)?

Generali

Jonbvn wrote: »

The question that springs to mind is what as individuals should we do to offset problems related to deflation?

The first AFAIK should be pay down debt ASAP. What about others?

(Please don't tell me the gold bugs were right);)

Well gold is just another asset and if the UK ends up with deflation then that means fiat money is becoming more rather than less valuable.

In deflationary conditions you should have as much cash as possible and that is one of the self-reinforcing characteristics of deflation.

Deflation should be negative for gold values as measured in fiat currency.

purch

are the possible outcomes from here increasingly looking fking messy?

Yes, it's hard to see how there can be a 'real' recovery in the Economies of U.S.A./U.K./Eurolalaland whilst this contraction continues.

P.S. I will always resist this 'double dip' nonsense until there is a real sign of growth in the economy. To have a double dip you need to come out of recession and have some proper growth first.

purch

Can you explain what M1,M2, M3 & M4

M1 is basically cash and cash like stuff (travellers cheques) and on demand money

M2 is M1 plus money on deposit with Banks and BS

M3 is M1 and M2 plus all the other money floating around the money market

M4 is always congested, especially the Chiswick flyover.