PC:
I'm no academic, but I do know that inflation and deflation are not mutually exclusive in any given economy. As you point out, we've tons of insane inflation in financial instruments (love that expression, it sounds so much better than "toilet paper") and central banks everywhere have hired extra shifts for the printing presses. That said, one has to have been on vacation on Mars (with Abby perhaps) not to marvel at the power of the current wave of deflation rolling out of Asia. Governments will try to print their way out of its path, but I suspect this one is simply to powerful to avoid.
In the tech sector, it's endemic. Too much manufacturing capacity, and saturated markets equal price wars. For most tech companies, Q2 represents the third descending quarter in a row, and there is acceleration. Analysts or CFO's looking for a second half rebound are just plain lying, as there is nothing out there to suggest this.
Jim Grant, Richebacher, et al have got it right when they note that excess (easy) money/credit leads to excess capacity expansion. We've had an enormous dose of this in the tech sector. Now comes the price wars and bankruptcies that restore the balance and wash out the excessive debt. "Deflation" is the polite word, but we will all know it as "a depression" before it recedes. I'm sure as heck not looking forward to it, but I'm also not sticking my head into the sand on the beach. Those who refuse to recognize that which is approaching will pay an appropriate (high) price.
Now how the heck does one call the timing? (g)
Best, Earlie |
