"Deflation" in Europe is actually Inflation in disguise

[GreenStox]

I don't see massive inflation coming for the simple reason that all the free borrowed money as well as the bulk of income and gains in income  are going to the top layer which is more intent on buying assets rather than spending at the super market.

When people don't have jobs or jobs that pay well its hard to see an explosion in prices.

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.

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...

[Hawker]

I don't see massive inflation coming for the simple reason that all the free borrowed money as well as the bulk of income and gains in income  are going to the top layer which is more intent on buying assets rather than spending at the super market.

When people don't have jobs or jobs that pay well its hard to see an explosion in prices.

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.

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? 

[vvv8]

lol this guy, welcome to ignore

[GreenStox]

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? 

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.

[Hawker]

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?  

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:

PIMCO bond manager Bill Gross says current fears of an asset bubble are "unfounded" and that stocks, bonds and real estate have room to run.

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.  

[manselr]

I sense a disturbance in the force.

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

[Hawker]

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. 

[daoneway]

INFLATION: INCREASE OF MONEY SUPPLY = RISING PRICES

DEFLATION: DECLINE OF MONEY SUPPLY = LOWER PRICES

[GreenStox]

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.  

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.

[johnyj]

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.

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.

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)

[johnyj]

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.  

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.

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

[GreenStox]

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.

[Hawker]

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?

[deisik]

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.

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...

[dinofelis]

M2 is like your bitcoins in an exchange, it only exists in database, not spendable.

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.

It is M0 that drives economy activity, M2 is only a record of those activity as a result of M0's flow.

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.

[manselr]

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.

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.

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)

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.

[GreenStox]

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.

[cparsley]

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.

[GreenStox]

I wonder what those charts would have looked like if the "markets" were 90% human like the olden days rather than 90% algo-bot vaccum tubes?

And how about prior to the good 'ol interwebs....hardly anyone would have known about a nothing day like this with a not so impressive ECB/FED statements.

We barely would have noticed a blip.

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.

[dinofelis]

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.

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.