"Deflation" in Europe is actually Inflation in disguise

[dinofelis]

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.

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[dinofelis]

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

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. 

[GreenStox]

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.

We all know money supply has been increasing. Why hasn't  this translated into inflation,?

It hasn't because of money velocity and shadow banking. Primary dealer banks ensure this new money goes into Treasuries, not the economy, through commercial loans and it's attendant fractional reserve money creation. Treasuries through reverse repos are then used as collateral, instead of banks loans.

This insures money velocity is low, and inflation is funneled into demand for Treasuries is high ie. Yields (and interest rates)stay low.

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.

[scryptasicminer]

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

[GreenStox]

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

The Oil Price

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!

[deisik]

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

The Oil Price

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...

[GreenStox]

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

The Oil Price

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. 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 is 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

[deisik]

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

The Oil Price

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. 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 is offset through volume...

Yea but oil fields in saudi arabia are limited, why waste a finite resource to fuck off with competition.

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)...

[GreenStox]

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. 

[deisik]

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...

[GreenStox]

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.

[aso118]

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.

[btcbobby]

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

[GreenStox]

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

Deflation can't be inflation in disguise because they are direct opposites.

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

[GreenStox]

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.

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.

[peeveepee]

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.

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.

[deisik]

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.

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?

[vvv8]

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

The Oil Price

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!

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.

[dinofelis]

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.

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.

[Hawker]

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.