Hi glenn, and unbelievable
hope you don't mind me jumping in.
I am glad the question came around to inflation / deflation ( i sort of lost the thread that the others had going here
before the fed acted by inaction and i lurked till now).
My view is war is inflationary, always has been always will be.
From that perspective the Afghanistan war on terrorism action has been inflationary, and the Iraq war pending will be too.
Offset against this is the market collapse, which should have a deflationary effect.Especially in a population of aging baby boomers that are desperate to secure their retirement comforts (Canada and the US today?). Feeling poorer this cohort of investors slows it's spending. Inventories rise, prices drop, the smart money sees this, says "aha - deflation - I better not spend - i'll be wealthier if I don't cause things are cheaper later in deflation"
Now if the Fed has addded 15-17% more money to the system and production is crawling at 2% ( per UnBlvbl), my guess is we actually have a horrendous deflation spiral going on that is masked by the printing of currency, and war induced offsetting inflation. We appear to be in balance, but it is an illusion.
From what little i have read on the subject, deflation is intrinsically uncontrollable. It is a psychology thing that stops folks from spending unless absolutely necessary - to control that psyche one must control the media, and
/ or give them "very seductive toys" to spend on that some how are 'important" to them like, say, the internet.
Anecdotally, If we go back to the days of "dubya's" dad's war on Iraq, there was at that time a rumour of deflation too, but we skirted it and the tech boom came along and well here we are again. Interestingly, for me at the time I was, for personal reasons, watching the retail price of cheap drill presses ( taiwan imports, heavy, lots of cast steel, and copper windings) back then they suddenly dropped, on a curve over 2 months or so, to half price ( from ~ 200$ to 112$ or so - these were the little 8" type)
Today, I opened my local rag's advert inserts, and lo, CdnTire is flogging the same things at 49$ - a month ago they were 108. History is repeating itself, and I have to wonder though if the scale hasn't amplified a hell of a lot.
These tools are interesting , as they only have a retail market ( real shops use bigger tools), they come from a part of the world which is outside the reach of the fed. They have actually a long order to delivery lead time ( shipped by boat, after a production line / smelter mfg'g process where labor is cheap). There is a visible dynamic here, and I don't get the full picture, but deflationary is the key word I think.
Back in Bush sr.'s day the internet-as-a-product was not real yet. I don't think I could go to a Web site then and have had this sort of discussion.
The internet drove the tech boom ( esp. in the stock market), I now wonder if there will be a " net effect" on deflation? A net driven psychosis? Or perhaps the collapse of the telcos has sent JQ public back to his/her TV and the media can present a "comfy" lie whilst the net is "no longer cool".
A final unrelated thought, Which is more dangerous to JPM and C ( re their derivatives pyramid) : Inflation, or deflation? and why?
All the best
..rr |
