Wordwide deflation? What's going on?

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Today's WSJ has a couple of front page articles detailing collapsing prices for commodities, government bonds and common stocks. After years of having our Federal Reserve pump created money out with which to buy government debt, you would think that US deflation would be the least of our concerns. Maybe not, since US Treasuries with a ten year maturity rose in value to a little over 2% yield Wednesday. Euro and Yen demominated government debt rose to even higher prices and lower yields. I have a fair knowledge of economics and finance and this makes no sense to me at all. With all of the liquidity unleased by our own Federal Reserve alone as well as our own government's enormous fiscal deficit, how can we be seeing serious indications of an era of actual deflation? Deflation is what made the Great Depression great. We should all hope that it doesn't actually come to pass in any sustained fashion. Forty years ago, inflation was the real fear in this country, and we endured a sharp recession beginning in the late Carter years to allow the Fed to kill it. Who would have thought that by the second decade of the following century we'd be facing a generally falling wage/price level, which the Fed appears powerless to counter. I'd love to hear some rational explanation of what's going on here.
 
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Yeah a few of the fringe economic schools of thought said it would play out like this in the immediate short run. LR, like 2022 and beyond the system gets very strained. But we never had a short run debt problem. A lot of folks were saying that for years since 2008 but propaganda destroyed it. Of course, you can also find folks that think hyper-inflation is right around the corner too but clearly it's not playing out like that at all. It's one big ponzi scheme.
 
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I don't think we can have a real discussion about what is going on without violating the forum rules. A shame.
 
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<span style="font-family: 'Verdana'">For the first time since 1973, the U.S. Dollar has competition: gold backed currencies such as the renminbi and the ruble. The BRICS nations are getting ready to bypass the dollar for good. The Global Elites are finally realizing that if they don't do something to strengthen the dollar, the world is going to dump it.</span>
 
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All that "liquidity" went straight into the pockets of the banks. They were supposed to turn around and lend it to the rest of us. They did that to some extent, but kept most of it for themselves due to disincentives to lend both regulatory and return-wise. Companies have about bought back all the stock they can and are sitting on massive piles of cash. The folks with intact credit ratings refinanced their mortgages and purchased new stuff if they could afford it. They're about done with that now. Now the banks are chasing the fringes again to find better returns on "their" money since those folks are the only untapped market left. Folks are hoarding what little money they have since the banks and companies are doing the same. It's going to take an external force in the form of changing the market to get this status quo to change. The Fed did what it could. What's next is outside the boundaries of discussion on this board.
 
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Simple: huge deleveraging in the financial markets and shrinking of credit since 2007 means strong deflationary trend. Massive money printing was meant to counterbalance that, but ultimately will fail like other monetary interventions. You can temporarily dam a river, but you can't reverse it.
 
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Money is currently incredibly cheap and there is no way deflation will take hold due to huge population increases and scarce natural resources. Also pushing us towards inflation rather than deflation is the US has printed a million tons of additional currency in the last 10 years. The current deflation scary hype in the news is just latest temporary hype being used to scare people so they keep watching the moronic 24x7 news channels whose actual primary mission is not to inform or educate but instead to sell adult diapers, Sham-wows, and boner pills to those gullible enough to watch 24x7 news.
 
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Originally Posted By: Danno
We survived $9 a barrel oil in the 90s.
Very true! And I was working on an oil rig at the time and the company still made money.
 
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Originally Posted By: cashmoney
and there is no way deflation will take hold due to huge population increases and scarce natural resources.
Shrug. You can have increase in some commodity prices or even stock prices and still have macroeconomic deflation due to shrinking credit. The reality is worldwide economic growth stopped in 2011 and the only reason global recession was not officially called was because the system was flooded with funny money and the official inflation number was underestimation of the real inflation, giving an illusion of growth. Smoke is clearing now and you a have a glimpse of reality. Fear not, more QE is in the cards.
 
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Originally Posted By: cashmoney
The current deflation scary hype in the news is just latest temporary hype being used to scare people so they keep watching the moronic 24x7 news channels whose actual primary mission is not to inform or educate but instead to sell adult diapers, Sham-wows, and boner pills to those gullible enough to watch 24x7 news.
Bingo. We should only be so lucky as to reverse the 100+ year inflation trend in the USA. Alas, inflation is looked upon as a positive by entities in chronic debt.
 
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Originally Posted By: fdcg27
Today's WSJ has a couple of front page articles detailing collapsing prices for commodities, government bonds and common stocks. After years of having our Federal Reserve pump created money out with which to buy government debt, you would think that US deflation would be the least of our concerns. Maybe not, since US Treasuries with a ten year maturity rose in value to a little over 2% yield Wednesday. Euro and Yen demominated government debt rose to even higher prices and lower yields. I have a fair knowledge of economics and finance and this makes no sense to me at all. With all of the liquidity unleased by our own Federal Reserve alone as well as our own government's enormous fiscal deficit, how can we be seeing serious indications of an era of actual deflation? Deflation is what made the Great Depression great. We should all hope that it doesn't actually come to pass in any sustained fashion. Forty years ago, inflation was the real fear in this country, and we endured a sharp recession beginning in the late Carter years to allow the Fed to kill it. Who would have thought that by the second decade of the following century we'd be facing a generally falling wage/price level, which the Fed appears powerless to counter. I'd love to hear some rational explanation of what's going on here.
Q.E. is being phased out. Higher expected returns on investment brings global funds in. This increases the value of $ compared to other currencies and commodities. EU is in full speed pumping liquidity into its markets. China is growing in a less stellar way. The economic growth in the US is not being felt by masses. Visible mainly in corporate earnings. It is not trickling down fast enough to the ordinary men and women who do spend the majority of their income.
 
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Originally Posted By: GaleHawkins
I see deflation too if you are talking about income. The expenses are still inflating at my place.
Yup, this is what I'm talking about. The real wages are going down. I didn't have a raise since 2009. But I'm lucky not to lose my (relatively well paid) job. My wife did lose hers and only recently got a new job after years of looking. Globalization basically means poor countries become richer and rich counties become poorer. The only thing is, the rich in US got richer. Go figure why.
 
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Originally Posted By: friendly_jacek
Originally Posted By: cashmoney
and there is no way deflation will take hold due to huge population increases and scarce natural resources.
Shrug. You can have increase in some commodity prices or even stock prices and still have macroeconomic deflation due to shrinking credit. The reality is worldwide economic growth stopped in 2011 and the only reason global recession was not officially called was because the system was flooded with funny money and the official inflation number was underestimation of the real inflation, giving an illusion of growth. Smoke is clearing now and you a have a glimpse of reality. Fear not, more QE is in the cards.
I think you nailed. The Fed has been massively successful in the QE program, at least for Wall Street. But sooner or later we will have to deal with the after effects. They may not be here yet but they're coming...
 
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