Bitcoin Forum

"Economics is so easy that only economists can't understand it" (No idea who said this)

I saw many articles about deflation in Europe, and the same thing always, it's just propaganda. The central banks are now going out of their way with the lies they put it, they even exceeded themselves in all those lies.

So what i`m talking about? It's all those mainstream news that say that there is deflation in Europe. They lie or they are idiots.  :)

The premise is simple:
1) QE money has been lent out to non productive companies, a.k.a companies that shouldn't exist in normal conditions, most of those companies are insolvent, and only the constant loans and cheap debt keeps them out of bankruptcy. These "zombie companies" create shitty products and services that obviously nobody wants, otherwise they would be profitable, however since their cost is easy to finance with infinite debt, they flood the markets with it. So we got shitty products and services flooding the market, at an ever decreasing price.

2) Ok so far so good. Supply is every increasing, but demand doesnt. Demand is frozen, as people have less and less money, or in best case scenario they have the same income, so consumption declines or stays constany while supply is growing. Now because of this, all prices go down, except the ones that are directly pumped by qe money (stock market, bond market), all other markets are going down in price.

Now the question is, is this deflation? I don't think so, only an amateur would say this (which we have plenty of "economists" on TV saying it)

Actually since, wages go down too, infact, they go down even faster, thus the purchasing power of the consumer goes down. That is inflation my friends, disguised as deflation, because the price goes down, but demand goes down faster than price (unhonest price discovery and artificial pricing).

Thus at the end of the day, the consumer has less money, and relative to his wallet, the price goes up actually. The absolute price can go down, but the relative price to his wallet is going up.

Is it that hard to understand, seriously? Those idiot presstitutes and their idiot "experts" can't even understand this what a 5 year old can understand?

Now after they hijack the "deflation" word lemme explain what deflation really is: product & service price goes down and demand goes up. That is deflation.  :P

Deflation is not the source of the misfortune.

Deflation, the reduction of output of the economy, is the sympthom of QE/ZIRP.

Looks like people still dont understand what deflation is. It's not deflation that is happening. It's a skewed inflation or reverse inflation, that has the same characteristics as inflation.

What is happening now: Prices go down, demand goes down faster -> Prices are rigged, unhonest price discovery , artificially high prices

Normal market: Price goes down simultaneously with demand

Deflation market: Price goes down, demand goes up


So since now the price goes down slower than demand, the purchasing power of the currency is decreasing => Inflation, and the net income of the consumer aswell.

In a deflationary economy, the currency is always strenghtening, the purchasing power of it is going up, and the consumer has more money, thus he will spend more => Prices go down, demand goes up.

Is it that hard to understand bro?  ;)

What would be your best method to fight it then?

Well since its inflation, the best way to fight it is to stop printing money. Or raise interest rates and atleast pretend to not print money.

The best solution is to abolish all central banks, they rig the whole economy anyway, and they wont increase the interest rates now with all the world debt.

http://www.nationaldebtclocks.org/

At the moment central banks are still pivotal for our economies. All of our financial transactions are processed by them or acted as middle men.

bitcoin/something decentralized, something that is deflationary, and not controlled by a central entity, we have all this right now, it just that you can't force the bank/government to adopt it, you should "force" the people around the world first, then the bank/gov will follow compulsorily

Sorry, GreenStox, you are not talking about deflation. Depending on who you talk to, deflation is falling prices or a reduced money supply. Deflation can't be inflation in disguise because they are direct opposites. Inflation is rising prices or an increased money supply, again depending on who you talk to. You are writing about

There can not be deflation when the money supply increases. However people's income is different: Those in the bottom of the food chain are still suffering from a lower demand and lower income, while those at the top of the food chain are getting higher income and higher demand for those things that are not included in inflation/deflation statistics (capital goods and assets)

So the price of capital goods and assets will rise quickly, bring hyperinflation at top of the food chain, while the price of daily consumption goods will still drop, drag the CPI, PCE indicator down

Sorry , as i learned in university (not as if that is some very accurate info), i learned that deflation is the decrease of the money supply. That is a good definition of it.

Falling price isnt a deflation, its just falling price, the price cannot inflate/deflate, only the money supply can. Prices can rise and fall, thats the only thing they do, or remain the same.

When we talk about deflation, we must have a fixed, or a decreasing money supply. Bitcoin is not entirely deflationary, but i would say its semi-deflationary.


Yes but we dont have deflation. The presstitutes only hijack the word "deflation" and call the current phenomena deflation, when its obviously not.

Most people, like you, think that deflation is equal to decreasing prices, which is obviously not. Prices can decrease in inflationary enviroment too (although only for a temporary time until the real printing press kicks in).

If the average consumer's earnings decrease faster than prices, that is inflation, and we got that exact thing happening now!

This has been the case in Japan for nearly two decades by now. Deflation there started in the early 1990s, and despite the efforts by the Bank of Japan and the government through the reduction of interest rates and quantitative easing (money printing), it nevertheless persisted...

I`m not sure what "deflaton" you have in Japan. Also please stop using deflation as a synonym to price decrease because they are not!

Also, you dont even have price decrease in Japan. So their government is a totally liar.Just look at BTC/JPY price:

1 BTC = 155 £
1 BTC = 27800 ¥

How shitty that currency is, the prices obviosuly go up as the curreny is becoming toilet paper...That sounds like hyperinflation to me, but i must be an idiot for observing that, the mainstream media presstitutes are always right isnt it? ::)

Moving some of the currency into btc,stop printing bills, raising taxes,interest rates may help in easing it, having more and more people adopting the btc and educating them on the convenience and vaue of  decentralized transaction

I think you'd better stop misusing the term, deflation means decrease in general price level, period. This meaning is well established and accepted by most. Regarding the average consumer's earnings decreasing faster than prices (which you consider as inflation), you are evidently confusing a bunch of different economic notions and phenomena. Do you count unemployed (and partially employed) as an average consumer, and thereby their earnings (or lack thereof)?

And yes, deflation in Japan started with real estate market collapse (prices fell drastically)

Actually for indebted persons its not, because their wages could go up, but the nominal value of the debt goes up aswell, along with the interest rates, and that can hurt them.

You got a 30.000 yen debt, which is like 150$, suddently the yen gets stronger now you got a 150.000$ debt referenced in 30.000 yen. Which one is better?

However in a deflationary economy people would not be indebted so hard. Credit cards would not exist, and only business loans would be made, as cars and houses could be bought from 1-2 year salaries.

As I said, for some people it is inflation, for some others it is deflation, depends on where you are in the central bank's food chain. In an expansionary monetary policy, those who first get central bank money will always get rich regardless of inflation/deflation. And these rich guys might not be interested in spending money to stimulate the economy (which is the most inefficient use of money during a recession), they just send their money oversea and hunt for other assets

Because JPY had experienced strong appreciation even after the finish of plaza accord, most likely their money supply increase were not fast enough because of the fear from the housing market collapse

People should not get into debt in the first place. Every logic that applies to healthy person might not be suitable for a sick person

Debt always involves some future uncertainty, thus incur some kind of risk, there is no systematic way to remove that risk. The most risk-free way is to use saved money, then there will be no loan, no interest, perfectly stable finance

But people are greedy, they want something that they don't have today and they hope that they can pay it back tomorrow, so they take loans. IMO loan is some kind of gambling, you bet your future for something that you want today, and if that future does not hold, you will lose much more than the occasion when you don't gamble

If a society is full of gamblers, then the normal logic does not work any more, there will be strange theory and logic developed to specifically serve this kind of society

Wages don't go down in the short-term. so declining prices in the EU is "real" deflation, even relative to the purchasing power of consumers.

Inflation (and deflation, for that matter) is not defined on a personal basis, as you might have known. It is a general price increase or decline. Furthermore, whether or not the rich guys might be interested in spending money to stimulate the economy is not directly relevant to the point you first made, that deflation cannot exist in an expansionary monetary environment (actually, it works against your point). In fact, an expansionary monetary policy is used to fight deflation, but its mileage, as it were, may vary, and they have to coexist, at least for some time (by definition)...

The whole picture is more complex than some single formula. After 2008, added money supply just flew out and pumped up the commodity and oil price around the world, and to china, to raise the housing price in china. So the inflation can be exported, no current economy theory discuss this in detail. Even in home country, new money are mostly used to buy more and more bond, thus drive the bond inflation, but bond is not included in the CPI/PCE, the whole nation would still be dragged into deflation (Due to more debt, and less consumption as a result)

Of course those money will eventually "trickle down", but since majority of those money flowed to some other area, the effect of an expansionary monetary policy might not be felt in 5-10 years, makes the operation itself very inefficient and a waste of resource, the only thing it achieves is moving wealth to the money creator and their friends

One has to be careful with money supply and QE.  The money supply that counts is M2 money.  What QE is about, is M0 money.  However, with compulsory credit contraction due to Basel III, the huge increase in M0 doesn't translate in a huge increase in M2 in fact.  What happened was that the ratio M2 / M0 has seriously been pulled down, and that, at the same time, M0 has significantly increased (QE).

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=2052

As you can see, the "normal" inflationary increase of M2 has not really jumped up in 2008.  In fact, there was even a slight stagnation at that time.

http://www.tradingeconomics.com/united-states/money-supply-m0

The M0 supply is much more jumpy as one can see, and one clearly sees the steps due to the QE.  But it has not much influence on the real M2 supply.

I'm not so sure.  After all, this comes down, during these years, for the USA to be able to get goods and services from others "against printed green paper".  Bretton-Woods was nothing else but a strategy by the USA to be able to buy the rest of the world with a printing press of green paper. 

Doesnt matter eventually it will show up in 1 way or another. Let's settle then on 1 thing, inflation doesn't occur, or atleast the standard textbook definition of inflation hasn't occured yet.

That doesnt mean that a more subtle and hidden form of it isnt occuring now. Because although you can't see inflation, you can definitely see it;s sympthoms.

Symptoms:
-Taxes raising all over the world, constantly, to pay the interest on the debt (even though the interest rates go down), the debt is growing, all governments are on deficit
-Due to inneficient allocation of credit, and the creation of zombie companies, many people are unemployed or soon will be unemployed when those guys go bankrupt
-Average earnings still rise slower than inflation (whatever the real inflation numbers are) , thus demand shrinks while supply is ever growing
-To compensate and hide the shrinking demand, credit cards and short term credits are used to boost demand

Now in my view this is a revolving door ponzi scheme, or a money funneling  "hot potato" game, and the 1 thing that ever grows is the debt, you just can't hide that.

So if you guys are right and indeed there isn't any textbook inflation yet (although the government can just rig the CPI numbers), the fact that it's so constrained, and the money velocity is the only thing that keeps inflation from suddenly spiking, then when the system implodes, hyperinflation will be imminent, unless they find a way to impose total capital controls, which now they think about eliminating cash.

There were over supply of housing in Europe. Price correction should not be interpreted as deflation.

I have also another theory why the "temporary deflation" occurs in minor markets.


For 1 year now the oil price has been low, and obviously oil affects minor markets: agriculture,plastic, transport, energy,etc.

So these price drops in these areas due to low oil price, has hidden the real inflation going on in the stock and bond markets.

Just wait guys until Saudi Arabia pulls back it's oil production, then the real inflation will kick in, all around the board!

I heard they had been actually going to expand oil production. The lower prices are in fact profitable for those whose production costs are less (and Saudi Arabia has the cheapest oil). This advantage is two-fold. First, there will be less competition since oil producing companies with high costs go bust. And second, lower prices stir up consumption, so the decline in profit per barrel will be offset through volume...

Yea but oil fields in saudi arabia are limited, why waste a finite resource to fuck off with competition. And they dont have overreaching capabilities like the US, so if they want to destroy the shelling industry of the US, they will just find new oil fields near their coasts or influence zones, and they will be better off that way.

Then again that will force the EU and the USA to do QE infinity, to save their internal oil manufacturers and the stock market malinvestments that happened in oil companies.

So either way, inflation will come sooner or later :)

Oil is a resource as long as it sells (that is as long as it brings profits). If it doesn't, then it is no longer of purpose to oil exporting countries, before all. So, economically, they would sell it at any price and as much as possible, being vitally interested in bringing down the competition at that (even if it means lower prices)...

No oil is a resource that the whole world economy and civilization is based on, sure it can be substituted but its not in their interest. Without those middle east countries exporting oil they would turn into zimbabwe in a month.

All those palaces and luxury you got in the UAE and Bahrain would turn into Zimbabwe or Ghana in no time without their oil supporting their economy. They got historically lucky to be in that oil rich region, so they can permit themselves 1-2% taxes, while we pay 80-90% taxes.  :(

What are you arguing with? If they (oil producing countries like Saudi Arabia) won't be able to sell it (for whatever reason), oil will be of no use to them. They are just selling it, and that's all they do. Go read my post again instead of engaging in futile polemics...

Yes but that wasnt the point, they could sell it at high price just as they can sell it at low price. And they only sell it on low price to kick out competition. Which in my point is a waste of resource.

Now of course, soon they wont be able to sell it at high price as everyone will be broke, or the currency has to devalue a bit more so that the high price can be reached again.

And the fact is also fact, they will always be able to sell the oil, at whatever (reasonable) price they wish, because oil is a necessary resource.

The oil boom happened because of the invention of internal combustion engines, which used gasoline. Earlier, the only use of crude was thought to be to get kerosene, which could be used in heating! Nobody predicted that motor vehicles which used ICEs would become abundant.

Nobody can be certain that there would be a market for crude after 50-100 years. If alternative technologies like fuel cells / renewable energy sources take off, crude can plummet real quickly. So Saudis are not wrong in trying to make the most out of today's market.

I'm aorry, but deflation can't be masked by inflation.

Yea but they surely run a big oil cartel and powerful lobby groups that try to slow down all progress in alternative energy.

There is already a technology that can power the whole planet with almost free energy: natural gas created from algaes.

Of course the cartel doesnt like it.

There are many over hype alternative energy. If these technologies are efficient, many can do it at home.

It remains a resource to them only as long as they can sell it. If the price is high they sell less of it (and get less in profits), since there are many other sellers beside them at the market. If the price is low, they can sell more of oil and thereby earn more through volume. Is it really so hard to understand?

Yes.

It's soo funny, cause this thread is filled with people that believe what they're being spoonfed. Deflation ? ROFL THAT DOESN'T EXIST, THERE IS NO COUNTRY IN THE WORLD THAT DOESN'T PRINT MONEY ON A CONSISTENT BASIS. For every piece of paper that is printed, for every increase in the money supply is a decrease in the purchasing power of any individual in a given point in time.

Every day you sleep and wake up, you are experiencing a higher amount of inflation compared to the previous day.

markets, stocks, bonds, this whole system is rigged by the big men at the top. Right now, they're putting all their effort into masking this rigged system that is about to crash and burn. There are many reasons why the traditional FIAT system will die out, I don't really want to get into all that because it would be a huge detailed list that I don't want to share on public boards.

Any country that tells you their currency is strengthening, or that they're experiencing deflation are infact trying to tell you that they're the ones that will be hit the hardest by the upcoming global recession. I think hyper-inflation is something the sheeple will be learning about from CNN, or BBC, when the shit hits the fan in the not so distant future.

Well, there are two definitions of inflation/deflation.  One is monetary inflation/deflation which has to do with the amount of money.  There, you are right that all monetary assets are inflationary, in the sense that more and more of them are circulating.

But most of the time, by inflation/deflation, people mean the average price level, that is, the purchasing power of a unit of monetary asset.  Now, then you get discussions over "purchase power of WHAT ?" of course.  There's a whole bunch of baskets which can be used, and you can discuss until the sun becomes a red giant what basket should be used.   Should investments be included in the basket ?  Should only end consumer items be included ?  Is it the Big Mac index ?

It is not impossible that the price level decreases ever so slightly of a consumer basket.  Even in a monetary inflationary situation.

We haven't yet witnessed 20% deflation levels.  When we are talking about 1% levels, the errors and the exact definitions introduce actually more variation than anything else.

Price deflation is in principle possible with monetary inflation if the velocity decreases (which means that people or institutions hoard more money), if the economy grows, or if there is more import than export (which means that more money is exported).

Now, as a characteristic of the US $, M2 inflation is of the order of 7% a year, but economic growth is not 7% a year.  This would mean that the difference should end up as price inflation. It doesn't.  So it means it gets into some vaults, or it gets exported.

And that's exactly what happens.  The US $ is the only world currency that is capable of being printed for free, and being used abroad to get goods and services (mainly oil).  Without those dollars coming back.  At least for the moment.

That's thanks to Bretton Woods and Nixon.

With that free seigniorage which is taken as a tribute from their "allies" who are supposed to accept $$, the US gouvernment mainly keeps up the most efficient military power on the planet (which would render any other economy totally crippled).  And with that military power on the planet, the US government makes sure that dollars continue to get accepted.

So "allies" of the US actually finance their own submission, by financing the war machinery that keeps them submitted.

https://www.google.co.uk/search?q=define+deflation&ie=utf-8&oe=utf-8&gws_rd=cr&ei=-o5GVZ7aNtffaqTUgZgI#q=define:+deflation

Deflation is the "reduction of the general level of prices in an economy." 

OP wants to change the definition of deflation since the reality of it doesn't suit his agenda. 

The general level? How or what is the "general level" ? There are too many commodities in a nations market to be measured. Sure, some might fall in price, but others will rise.

You can take the average, but it doesn't matter. Why? Because while some entities will be interested in purchasing goods or services which have fallen in price, other entities will be focused on commodities which have risen in price. One entities reality, is different to anothers. One guy can tell you there's inflation because of his experience, the other will tell you there's deflation.

That's why your copy pasted definition is garbage, something to steer you away in some silly direction that is meaningless.

Inflation should strictly be looked at from a monetary asset point of view, because the purchasing power value of the wad of cash you got in your pocket is all that matters to YOU.

If you look up the original definition of inflation and deflation, you will find that it is defined as the increase and decrease in the money supply.

1913 definition according to Webster's Revised Unabridged Dictionary



Webster’s 1983 Definition of Inflation


The American Heritage® Dictionary of the English Language, Fourth Edition, Copyright © 2000 Published by Houghton Mifflin Company says:

Grow algae in your swimming pool or how? You need big containers and aquatic plants to do this, which need 100 millions of $ investments, however you probably also need some government permit, which *you guessed it* the government wont give you because the oil cartel bought the politicians :)

Yes that is correct, i dont know why people cant get it.

Price increase is not equal to inflation, deal with it!

Now you can get lowering prices in a deflationary enviroment, let's say the CB print money like madman, but the prices go down? Why, maybe because technology let them find ways to lower the production cost and make it more efficient, or they just increased the supply.

Doest this mean that inflation is not present? Well from a consumer standpoint his daily purchases wont be affected, but if that economy is based on imports, then start praying guys?

You see an autarky economy would never experience inflation, but almost every country in the world now has massive trade deficits, so that is the fact. Hyperinflation will come, and poor basterds will lose everything.

In europe, price are stable ... but weight of package decrease by 1/3.
so, we have 30% of inflation since 2 years ...  ::)

and no, it's not only on the ravioli steel box ...  ;D

example: in only 1 year, price per kilogram have rise from 7,6-8,2 to ... 9,8 euros per kg for the majority of snack (TV meal).

Thats also a nice way to hide inflation, shrink-flation.

I remember buying a pack of cereal when i was 8 years old, it was full, now they pack only a quarter of it, the rest of it is the package and the air.

Also i was eating chocolate a few days ago and it tasted horribly bad, i remember eating chocolate in my teens, and it tasted so good.

They change the ingredients to crappy and cheaper ingredients.

A nice brilliant way to hide inflation.

And then you blame the capitalists for giving you shitty products, when its the corporatist-fascist banksters fault (damn you fucking banksters!)  :D

Yes, Mcdonalds burgers use to be bigger.

Deflated burgers.

Falling prices from an increase in production is not deflation ROFL;

It is either

A) A readjustment of equilibrium price based on the increase in supply over demand.

or

B) Economies of scale, which have allowed a producer to gain the benefit of a lower production cost.

Fed fear deflation? Lol what a funny point of view....lol

That reminds me of almost every bag of chips these days is the same as well.

They want to make the same profit or a bit more, with half the product. Companies who do this are still rich as hell, which I can never understand the level of greed but then again comparing to banks they seem a smaller player.

As for hiding inflation, I think its just all around. You see more outsourced things that costed companies without totally ruining the product still.

make it simple please, it work in this way

deflation is when a currency have greater purchasing power(it could be because the price of goods as dropped)

inflation the contrary, when a currency have a lower purchasing power(because the price of goods is raised), the rest are semantic bullshit

It could be? What are the other reasons for a currency to have greater purchasing power?

another one maybe is limited supply, or purposely destroying it to raise its value

Through the whole 19th century the gold backed currencies have been constantly appreciating because of the technological advances (two industrial revolutions within the century) which allowed producers manufacture more goods while incurring less costs per unit. So greater purchasing power of a currency may be due to more efficient production...

Yes thanks for bringing up: OUTSOURCING

You know why the EU pushes for common european workforce, very simple. The same thing in America , bringing companies into China and India.

They want to get cheap labor so that the production cost would be less. Of course the price of the final goods won't be cheaper, because the inflation will grow. In fact it will grow, it's just that it wont grow in an exponential way, halting hyperinflation, but nevertheless, it wont stop it.

So OUTSOURCING is just another covert way to hide inflation.

No, deflation is deflation and inflation is inflation. Fin Mins of EU need to change job. Cleaning toilets is a good job for them. lol

Yes but contrary to the gains, inflation does trickle down. Any printing of money instantly devalues the currency, doesn't matter if it's spend in the grocery store.

Stock inflation is yes proportionally higher than average goods, but we are nontheless robbed aswell.

Appreciating money value is automatically and instantly distributed to all holders of money. No tickling up or trickling down. The moneyprinters would love that, it should kickstart that economy. If only they knew.

this is the calm before the storm, you just have to live in Europe to know something is going to happen... soon

You keep asserting this nonsense as if it were facts.  After 6 years of money printing in the US, UK and Euroland, you'd think the fact that prices have been falling would convince you otherwise.

Out of curiosity, if prices are falling, why do you care at all about this "inflation" you keep going on about?

So you think inflation can't trickle down? Huh, just wait until the stock, real estate & bond market collapses, then you will see real inflation.

All that money will flow into "hard assets" like Buffett said. Then the consumer will see how the Weimar Republic and Zimbabwe felt like.

Warren Buffet buying up railroads and farmland, soon all prices will rise over the board :)

Inflation can be postponed, but not forever...

Hmmm.  So your thing is that we have to wait?

What if I grow old and die waiting for the collapse you so eagerly hope for? 

lol this guy, welcome to ignore

Not that much more, a few months, at tops 1 year. The stock, real estate, bond market is at record high levels.

One of the biggest bond dealer company admits that the bond market is way overvalued:
http://www.thinkadvisor.com/2014/05/02/pimcos-gross-pop-your-bubble-fears

Then again Buffet and others also admit that the stock market is overvalued. And the real estate market? I`m not even commenting that.

What goes up will come down, and then that money will crash into the economy, you will see insane price raises, that you long awaited for.

Um - that article says there is no bubble:

Back to your logic, you predict that the rest of the world will experience the fall in asset values that the Japanese experienced 20 years ago.

Leaving aside your mysterious ability to predict the future, you ought to notice that the Japanese experience is of deflation.  20 years of quantitative easing has not caused a whit of inflation in the land of the rising sun.  

I sense a disturbance in the force.

What is driving the collapse of euro? Is the market running from Draghi's QE bazooka?

The Euro was stupidly overvalued because interest rates were set too high a few years back at exact same time US and UK started QE.  Its a few years late but at last the EU is addressing the overvalued Euro with low interest rates and QE. 

INFLATION: INCREASE OF MONEY SUPPLY = RISING PRICES

DEFLATION: DECLINE OF MONEY SUPPLY = LOWER PRICES

Have you seen a Bond market collapse? A major stock market collapse? No.

It didnt happened yet, and its all around the world.

Japan only experienced a bubble economy, estate prices to the roof, and without justification.


When you print money, that money has to go somewhere, and obviously stock prices,bond prices and real estate are not included in the CPI. So it gives you a fake sense of deflation.

But when those 3 markets collapse, you will see investors panicking and buying gold,silver, but not just that: hotels, restaurants, railways, factories, and such.

If that happens, and it will happen, then you will see the full force of inflation crushing in.


See the 3 elite markets (bond,stock,estate) are only like a giant dam that keeps the full force of water out, if it collapses, the full force of inflation with crush through and it will flood everything.

That is what it will happen and its already happening.

M2 is like your bitcoins in an exchange, it only exists in database, not spendable. It is M0 that drives economy activity, M2 is only a record of those activity as a result of M0's flow. It appears that M0 flows much slower, so you get a lower M2, but that is because M0 was not in circulation at all, they went to somewhere else

If M0 were really used to drive large modernization projects and employee people, the people's income will increase immediately. However those money went to buy oil and bond. A clear evidence is that after QE stopped, oil prices immediately crashed, and the drop in price is quite consistent with the amount of reduced liquidity each day (2.8 billion dollars per day from QE gives each barrell of new produced oil per day a price premium of $50)

If majority of people have holdings in those 3 elite markets, then it will really be a big problem

The interesting thing is, when people unconsciously use USD to measure value, if stock/bond/estate's USD price crashed, FED can easily print tons of USD and bring those price back, thus there will never be panic

On the other hand, USD's crash could cause some problem (hyperinflation), but since people use USD to measure value, in their eyes, the price of stock/bond/estate skyrocketing is a good thing! (In fact USD has been crashing hard against stock/bond/estate, it is already hyperinflation in asset world)

So, when those equity holding people trying to cash out their gains in equity market and start to spend, there will be an oversupply of USD everywhere, and cause price increase in daily consumptions, the real purchasing power will shrink quickly. But in such a situation, FED can not artificially support the equity market again using QE, because that will worsen the inflation in average price level. In the end, no one investing forever, some of those equities will be cashed out for spending, nothing can stop it from happening. So FED might need to tighten money supply to curb inflation, and that will accelerate the crash in asset market

Of course if all those equities are hold in the hands of a few, then there will not be mass scale of spending. So an unequal distribution of wealth actually helps to avoid inflation

Well they just postpone the inevitable. Eventually that printed money will be injected into the economy at large and that will be much worse than jsut a crappy crash.

The 2008 crisis nearly crashed the whole world, the next one will crash it. Why do you think they prepare for martial law in the USA? They know the dollar is in big trouble.

I`m not giving it more than 1 year, and we will see big calamity.

You keep saying the same thing as if it were a fact.  Japan has had an overheated stock market and real estate market collapse and has been printing money for years.  Their national debt is around 500%.  Yet they have only experienced deflation and their bonds sell for less than the inflation rate.  Think about that - it means people pay the Japanese government to borrow from them.

Can I ask? Is there any empirical evidence that will put your mind at ease about inflation?  You have said the bond, stock and property markets in Europe will collapse within a year.  If that doesn't' happen and if the consumer price index is less than 2%, can we agree that there is no problem here?

You think that ECB (or any CB for that matter) prints pallets of banknotes, and these are just waiting in some warehouse to be handed out to people in the streets? I guess your understanding of what quantitative easing is and what it actually does to the economy is greatly skewed at least, if not completely perverted...

You should read this:

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

and eventually this:

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneyintro.pdf

It is the British system, but most fiat systems are similar.
From the moment that you trust an exchange, and the holdings of an exchange, and from the moment that I can write a cheque, and from the moment that the exchange can lend out "database bitcoins" to people wanting a loan, without ever giving blockchain bitcoins, M2 is in fact the spendable quantity.  In the end, nobody would care about blockchain bitcoins, which would only be held by exchanges, and a few amateurs.  
There would be much more database bitcoins, than blockchain bitcoins, and those database bitcoins would be created at will by exchanges (respecting just a few rules of prudence in order to be able to satisfy the rare demand for redeeming in blockchain bitcoins).

Now, that scenario is unlikely with bitcoins because it is much easier to master, oneself, blockchain bitcoins.  But it is exactly how the fiat system works, where all kinds of legal barriers are set to be one's own banker so as to leave the privilege of money creation in the hands of *private banks*.  M0 has only a very limited effect on M2, and it are also private banks that decide upon the quantity of M0.  QE is a desperate effect to increase M0 without demand from private banks.


No, in fact, not at all.  M0 is first of all just a boundary condition by the fractional reserve requirement, but it is not always active (many banks now have excess reserves, so they don't care about M0).  And second, M0 can at any time be increased upon the demand by private banks.  There is no limit to the amount of M0 that a private bank can demand to be created.

I don't see the analogy there. Bitcoins at an exchange are very real, it just means you cannot spend them, because they technically don't own them, the exchange owners own them, and they could very well spend them if they wanted to fuck you over pulling a Karpeles.

Yes, the exchange cant make up bitcoins, because if he does then he just robs their customers, but the exposure doesnt spread to the whole system.

So if we got a nasty exchange *cough* MT GOX *cough* that runs on fractional reserves, he only robs his own customers but no the entire network, so the theft is contained.

Therefore, if we get honest and competing exchanges that will be good guys, that is what will give transparency + the public ledger.

In the fiat system, if we got a nasty bank that is caught all day rigging the markets *cough* B@rcl@y$ *cough* , then they rob every single user of the fiat system, be that the grandmother that shops groceries, or the business that provides it.

Decentralization = containment of theft = decreasing systematic risk.

With the current system if 1 bank falls, they all fall behind like dominoes, government's centralization, causes increased risk in the economy.

While I'd agree with you, by a technical definition it is a deflation. A seriously manipulated deflation, but unfortunately to your point a deflation nevertotheless.

The same. The bots mimic the human behaviour, its just that its faster.

The problem is with the printed money pumping markets up (without that it would crash), and tax payer guarantee whenever a big company fails.

If only one exchange does so, yes.  If it becomes a habit and exchanges start doing fractional reserve banking with bitcoins, then in what respect would that be different from the fractional reserve banking with gold when (private) banknotes were issued ?

Of course, it is much easier to withdraw genuine bitcoins from an exchange, than to go and withdraw your physical gold from the bank.  So the risk of a bank run is larger with fractional reserve exchanges.

But I don't see the difference, in principle.

Imagine an exchange having a much larger order book for BTC than it has offers, and suppose that amongst those orders, there are very interesting offers in terms of price.   Suppose that the market price is, say $250, and people are offering $500 for coins, with no matching offers.  What would this exchange stop from offering fake coins to those people, crediting their BTC accounts on the exchange.  If they withdraw, they could give them the coins from other customers who left their coins on the exchange.

If this is a generalized habit of exchanges (which is then so lucrative that it would be hard to resist) then I don't see how general fractional reserve banking on exchanges would not become true.

There were expectations to raise the rate in June, but based on how the EUR/USD is acting it would probably be postponed (and the EUR will keep on getting stronger against the USD for a short term) - probably August would be the date when this would reflect a strong reversal as many economists expect the Fed to eventually raise the rate, so if it's not June it would be September and then the EUR/USD might even reach parity.

I sincerely believe that all this economic fumbling about is a precursor to war in Europe. There are other forces at play that want another major war to break out in Europe, most probably again in the problematic Balkans as there is a lo0t of ethnic strife left over from the Ottoman Era.  :'(

It can raise rates because deflation, because that would make corporations go bankrupt, thus reversing the deflationary spiral, that is caused by cheap loans and wreckless risk-taking.

However it cant raise rates because the USA has a so big debt, that it would go literally bankrupt at an interest rate of 6%.

(Not to mention the other catastrophes that would happen if the private debt defaults)

When the prices go down ( i.e deflation takes place ) obviously demand will increase and eventually supply limit will decrease depending on consuming amount. Therefore , the purchasing power is going down which causes inflation. It's  a tactic basically by  the European government to gain more profits from the people.
 

According to investopedia, Inflation occurs when the price of goods and services rise, while deflation occurs when those prices decrease. The balance between the two economic conditions is delicate, and an economy can quickly swing from one situation to the other. So yes, the Europe is just maybe an inflation in disguise but I wouldn't really believe that, come on... There is a huge difference between inflation and deflation and we all know what it really is...

Is there any fiat currency that isn't suffering from inflation or hyperinflation at all? I can't think of a single one (that's relevant in worldwide economics, not some local noname crap)

I am always in a thought that Inflation is the worst scenario ever during the crisis or any economic disaster, But after reading your post, I came to know that Deflation is to be considered more seriously and eventually it has a drastic impact on country's economic condition. Well I am given to understand that during deflation, poor has benefits and rich will get bad hit, is that true ?

Deflation is a good thing, but not in the current economy. Besides deflation is only temporary, until the avalanche is contained, when all hell breaks lose, the inflation will pour down like an avalanche on the economy.

All inflation is sucked up in the bubbles: stock,bond, estate, land, car, etc

When the bubbles pop, you will have hyperinflation.

That is exactly what Greece kept doing, borrowing money proportionately and now they are unable to pay that back. They lost control and now its out of their hands. Most of us saw this coming and why did they wait long enough till things worsened to such limits.

Any debt above 70% of the GDP is impossible to pay back.

The current world average is about 80% or something along that line.

This also includes companies that have more than 70% debt to assets ratio, most companies are overleveraged.

Its obvious that the world economy will collapse.

After Greece , Italy is the next (normally it would be Japan but they got printing press , Italy doesnt)

http://2.bp.blogspot.com/-e39dWx1D_6w/VW6MbbTfvoI/AAAAAAAAZVU/vFr8CVzC13A/s640/CGgFe_nVIAAcF3Z.jpg

defaltion can occur when the purchasing power of your currency is stronger, not only because of the value of goods but because of the currency itself, like it could be for bitcoin, you can buy more because bitcoin will be worth 10k in the future(random example)

instead with inflation is generally referred to an increase in the value of the goods


italy is not in a good situation, but their unemployment rate fell in comparison with 2014(only 0.6% but it's still something), i'm not so sure that it will end like greece, time will tell

So basically the deflation gives rise to inflation in disguise.The main idea of deflation is price goes down , demand goes up. But here, the demand is going down faster than the price. Which is decreasing the purchasing power of people.

Trust me it will, Italy is the next in the line of falling dominoes.

Italy has not good unemployment, all italian companies go offshore and send companies to south asia or east europe.

The only people left there are the legacy workers and the big boys.

If they start freezing assets there too, then the big boys with their stash of money will lose it all like in greece.

Yes, but here the deflation is taking place because purchasing power of supposedly one currency is comparatively higher because of the value of the currency rather than the commodities. That is the reason why the deflation seems as inflation in 'disguise'. If the people aren't capable enough to have any purchasing power, than what is the use of these products and this currency?  :-\

reverse inflation,
the only word that describes reverse inflation is,
deflation.

Well the ECB doesn't have to print a single more eurocent for us to see Hyperinflation.

The inflation is already here, it's just that it's contained in these enourmous derivative bubbles:  1.6 quadrillion $ , that will see it's fair share in the European Union aswell.

When the hot potato gets bassed back and forth between the banks, and the bubble starts to pop, i bet everyone will start buying hard assets, so the big bubble will split into smaller bubbles.

Just imagine some whale buying up all farmlands, it will definitely rise food prices, as he expects to recover his investment by increasing food price, and since he has alot of farmland, his food price increase will increase it all over the region.

But inflation will trickle down in many other ways aswell: Stock market cashout, broker account cashout, and aquiring various other hard assets.

As for me deflation is wonderful. And this way must be theoretically for everyone which think only a little. Everything will cost less and with my same amount of money I will have the possibility to do more things with those. To buy more, to have more fun, to live better. More the time goes on more I will better and more I will have and more I will be well. I will have as conclusion always more goods and money.

But the question it is not so easy. In a more complex meaning the economist tell that the deflation, in overall situation, is not good for the economy. They believe that "generally .... deflation is a problem in a modern economy because it increases the real value of debt, and may aggravate recessions and lead to a deflationary spiral." The deflationary spiral is "a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price." So it can be see that the overall situation in long term may (can, will) not be improved but deteriorates. For this reason the economists until now has chosen and propagated the inflationary model of economy.

The question is: It is everything right in the above reasoning? Are right the economist? Their thoughts are thoughts or are any case or event which prove those? Only the practice can verified those. And that's the point. There were moments or better periods or situations of deflation in some country of the world during its story. Those testify that the answer to the above questions is mainly yes. Everyone who want to learn more about those can go to Wikipedia (from which are taken even the sentences quoted above from me) following this link: https://en.wikipedia.org/wiki/Deflation (https://en.wikipedia.org/wiki/Deflation)