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Title: . Post by: ChicagoSchooler on March 08, 2015, 11:43:52 PM .
Title: Re: US CPI and Europe already deflating Post by: Possum577 on March 09, 2015, 01:16:18 AM Why do you think that these facts will result in deflation for the "foreseeable future"?
And since none of us can predict the future you must have a very short time horizon. Ebbs and flows in the economy are common. We're going to need a lot more than a stronger dollar, weaker euro, and affordable oil to spell turmoil for the markets. Title: Re: US CPI and Europe already deflating Post by: NUFCrichard on March 09, 2015, 09:55:59 AM I missed both of these since I pay attention to neither, but the US CPI and Europe are already deflating. Europe continues to expand its yield flattening campaign while refusing to lower interest rates. The US CPI has already started to deflate, and it leads the PCE, the Fed's measurement of inflation (http://www.federalreserve.gov/faqs/economy_14400.htm). The PCE is already at 0.2%, probably one month from true deflation, so the US is probably already deflating. Hearing Fed governors try to explain the rationality of raising rates while in a deflation will be very entertaining. Oil at $50 and going down means deflation for the foreseeable future without lowered interest rates. Has the Fed backed itself into a corner with QE since it's so overweight long term assets? Can they even lower interest rates which would cause banks to demand back those long term assets, possibly causing the Fed to require a bailout from its losses? The US and European central banks may only have offers that they have to refuse to prevent further deflation. I'll give this to central banks: never a dull moment. I am no economist, so I don't understand how printing so much money, which should lead to inflation being rampant, has led to deflation, but that is where we are now. I tend to see the current deflation as a 'good' deflation, as it comes from reductions in energy prices, meaning that people have more money in their pockets, but it won't help countries that are in debt as their debt increases with deflation, making it even less manageable than it is now (it already isn't manageble!) Title: Re: US CPI and Europe already deflating Post by: razorramon on March 09, 2015, 03:02:59 PM I missed both of these since I pay attention to neither, but the US CPI and Europe are already deflating. Europe continues to expand its yield flattening campaign while refusing to lower interest rates. The US CPI has already started to deflate, and it leads the PCE, the Fed's measurement of inflation (http://www.federalreserve.gov/faqs/economy_14400.htm). The PCE is already at 0.2%, probably one month from true deflation, so the US is probably already deflating. Hearing Fed governors try to explain the rationality of raising rates while in a deflation will be very entertaining. Oil at $50 and going down means deflation for the foreseeable future without lowered interest rates. Has the Fed backed itself into a corner with QE since it's so overweight long term assets? Can they even lower interest rates which would cause banks to demand back those long term assets, possibly causing the Fed to require a bailout from its losses? The US and European central banks may only have offers that they have to refuse to prevent further deflation. I'll give this to central banks: never a dull moment. I am no economist, so I don't understand how printing so much money, which should lead to inflation being rampant, has led to deflation, but that is where we are now. I tend to see the current deflation as a 'good' deflation, as it comes from reductions in energy prices, meaning that people have more money in their pockets, but it won't help countries that are in debt as their debt increases with deflation, making it even less manageable than it is now (it already isn't manageble!) I am no economist either....my guess is you print a lot of money and give it to someone who doesnt spend it edit:fixed the wrong quoting Title: Re: US CPI and Europe already deflating Post by: tee-rex on March 09, 2015, 03:24:57 PM I missed both of these since I pay attention to neither, but the US CPI and Europe are already deflating. I am no economist, so I don't understand how printing so much money, which should lead to inflation being rampant, has led to deflation, but that is where we are now.Europe continues to expand its yield flattening campaign while refusing to lower interest rates. The US CPI has already started to deflate, and it leads the PCE, the Fed's measurement of inflation (http://www.federalreserve.gov/faqs/economy_14400.htm). The PCE is already at 0.2%, probably one month from true deflation, so the US is probably already deflating. Hearing Fed governors try to explain the rationality of raising rates while in a deflation will be very entertaining. Oil at $50 and going down means deflation for the foreseeable future without lowered interest rates. Has the Fed backed itself into a corner with QE since it's so overweight long term assets? Can they even lower interest rates which would cause banks to demand back those long term assets, possibly causing the Fed to require a bailout from its losses? The US and European central banks may only have offers that they have to refuse to prevent further deflation. I'll give this to central banks: never a dull moment. I tend to see the current deflation as a 'good' deflation, as it comes from reductions in energy prices, meaning that people have more money in their pockets, but it won't help countries that are in debt as their debt increases with deflation, making it even less manageable than it is now (it already isn't manageble!) I am no economist either....my guess is you print a lot of money and give it to someone who doesnt spend it The problem is twofold. The situation when private banks receive money from a central bank ("give it to someone who doesn't spend it") but cannot lend since there are no borrowers is called "liquidity trap". Furthermore, the new money from QE goes directly to financial markets, and, as a result, we see them soaring, taking new heights and making new highs while real economy is shrinking with prices falling. And this kind of deflation cannot be good since it leads to massive unemployment, what we see in real life. Changed the formatting for you. Title: Re: US CPI and Europe already deflating Post by: razorramon on March 10, 2015, 07:33:53 AM I missed both of these since I pay attention to neither, but the US CPI and Europe are already deflating. I am no economist, so I don't understand how printing so much money, which should lead to inflation being rampant, has led to deflation, but that is where we are now.Europe continues to expand its yield flattening campaign while refusing to lower interest rates. The US CPI has already started to deflate, and it leads the PCE, the Fed's measurement of inflation (http://www.federalreserve.gov/faqs/economy_14400.htm). The PCE is already at 0.2%, probably one month from true deflation, so the US is probably already deflating. Hearing Fed governors try to explain the rationality of raising rates while in a deflation will be very entertaining. Oil at $50 and going down means deflation for the foreseeable future without lowered interest rates. Has the Fed backed itself into a corner with QE since it's so overweight long term assets? Can they even lower interest rates which would cause banks to demand back those long term assets, possibly causing the Fed to require a bailout from its losses? The US and European central banks may only have offers that they have to refuse to prevent further deflation. I'll give this to central banks: never a dull moment. I tend to see the current deflation as a 'good' deflation, as it comes from reductions in energy prices, meaning that people have more money in their pockets, but it won't help countries that are in debt as their debt increases with deflation, making it even less manageable than it is now (it already isn't manageble!) I am no economist either....my guess is you print a lot of money and give it to someone who doesnt spend it Changed the formatting for you. jeez...what happened there...:) Title: Re: US CPI and Europe already deflating Post by: eizh on March 10, 2015, 10:12:20 AM I am no economist, so I don't understand how printing so much money, which should lead to inflation being rampant, has led to deflation, but that is where we are now. I tend to see the current deflation as a 'good' deflation, as it comes from reductions in energy prices, meaning that people have more money in their pockets, but it won't help countries that are in debt as their debt increases with deflation, making it even less manageable than it is now (it already isn't manageble!) I am no economist either....my guess is you print a lot of money and give it to someone who doesnt spend it edit:fixed the wrong quoting Roughly correct - the 'printed' money is actually composed of deposits held at the central bank. Although the owners of these deposits (other banks) could withdraw it and put it into circulation, they're being paid interest on it. The interest rate is very low, but it's risk-free so it's still a good deal from the depositors' point of view. Thus they keep the money locked up and the rest of the economy doesn't experience increased money circulation. Title: Re: US CPI and Europe already deflating Post by: dinofelis on March 10, 2015, 01:36:12 PM Indeed, all the "QE" stuff boasted first by the FED and now by the ECB is just a trick to make people think that there will be soon an inflationary effect, to make people fleed away from simple bank accounts, into "more profitable" assets, which are then blown up. That kind of bubble blowing is a national sports of central banks, because it makes their friends in the financial world rich on the back of normal people who are afraid for their savings. They do the same with gold.
I wouldn't expect much effect (apart from the psychological) from the ECB QE. It is more propaganda than anything else. No real money will be brought in circulation, but some banksters are going to get somewhat richer. Title: Re: US CPI and Europe already deflating Post by: johnyj on March 11, 2015, 04:20:11 AM This again proved that deflation has nothing to do with money supply (Base money supply has increased 5X and M2 also keeps increasing).
Deflation is just a result of severe wealth shrink for majority of people, including middle class and low incomes. There is no way to greatly change this by printing more money. Of course government can do some deficit spending and drive some large projects, but in today's society which is highly automated, the effect is neglectable Title: Re: US CPI and Europe already deflating Post by: tee-rex on March 11, 2015, 06:58:22 AM This again proved that deflation has nothing to do with money supply (Base money supply has increased 5X and M2 also keeps increasing). Deflation is just a result of severe wealth shrink for majority of people, including middle class and low incomes. There is no way to greatly change this by printing more money. Of course government can do some deficit spending and drive some large projects, but in today's society which is highly automated, the effect is neglectable If I remember correctly, previously you were saying that deflation increases real income, now you are saying that it is actually a result of severe wealth reduction? Did you change your stance, or is it me who misunderstands you? |