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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: sea_biscuit who wrote (90710)	1/22/2008 9:23:36 AM
From: Mike Johnston	Read Replies (2) \| Respond to of 110194

The deflationists celebrating ? Celebrating what ? That real Fed funds has just declined from -6 to -7 % ? Declining stock market is a bear market/correction/crash but it is not deflation. The stock market had huge gains and is correcting some of that, house prices have inflated 300% and are now correcting 20-30%. I see no indication of declining prices at the supermarket. Will i see gas prices go back down to a buck ? They can celebrate when oil is below 50, gold below 500, Dow Jones at 5000 , average house at 100K and when I see consumer prices go down with my very eyes.

To: sea_biscuit who wrote (90710)	1/22/2008 1:08:00 PM
From: John Vosilla	Read Replies (2) \| Respond to of 110194

'It is downright stupid to say that prices will fall in terms of something that the Fed has virtually promised to produce in trillions, even quadrillions if need be.' The stock market performance has nothing to do with deflation. In the 1970's we had several crashes. The squeeze on the American consumer and the housing armaggeddon due to lax lending and overbuilding is what is real.. Coming out of all this the inflationary pressures will be worse because our leaders refuse to allow a real recession and continue to run massive deficits and debase our currency. Ben Stein had a great article the other day where our worst recessions in the modern era were due to efforts to fight inflation. What is going on today will be a piece of cake to get out of as long as perceived inflationary pressures are moderate and long term rates so low during this down cycle.

To: sea_biscuit who wrote (90710)	1/26/2008 10:41:02 PM
From: glenn_a	Read Replies (1) \| Respond to of 110194

sea_biscuit. ((The deflationists out there are celebrating that they have been proved correct! So funny. Makes no sense to me whatsoever. Why can't there be new (nominal) highs later in the year? The Fed is ready to drop money via helicopters if that is what it takes to make a new nominal high.)) I'm not so sure I'd equate "deflationists" with "crazy people", "moonies", "Scientologists", "Britney Spears" or "UFO-spotters". [Of course, that's not what you said in any way, but I do sense you feel they ought to have their heads examined. :) ] I really do feel that anyone who doesn't possess serious humility in these very dangerous times is treading on very dangerous territory. IMO, to "celebrate with glee" either a deflationary or inflationary outcome is to be WAY too attached to one's biases. In the end, the market and economy will do what it will do - and we will have to adjust our theories to the reality, and not vice-versa. I can certainly see how there could be a hyper-inflationary outcome here. But I can also see how the deflationary forces of a credit bust could overwhelm attempts by central banks to recapitalize (which is NOT the same thing as "reliquify") the global banking system. As I stated in a previous post, in the end, many many people will have to SAVE more in real terms, and SPEND less in real terms. And that isn't fundamentally solved by either inflation or deflation. Rather, to my mind they're just different strategies for apportioning the suffering of the inevitably tramautic readjustment process. And this is not a process where the US or the Fed can unilaterally dictate terms and conditions. If they could, yes, hyperinflate away and consequences be damned. But I don't think that's the case here - and even if it IS the case for a while longer, it most certainly cannot be the case in perpetuity. As Russ says "In the end, we all sit down to a banquet of consequences". I do not believe that inflation is an easy way out of avoiding the banquet. But ... I could be wrong. :) glenn