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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (50936)	6/5/2009 12:34:26 AM
From: elmatador	Read Replies (1) \| Respond to of 218107

Its a process. Not an event. Analysts scratching their heads on the debate of inflation/deflation fail to note the obvious. Its a process. Not an event. We will have deflation, then we will have inflation. How deflation bites and how it is perceived as biting. Your money, in your pocket, does not move up and down. Goods and services you need to purchase and cannot avoid or are used to buy since it is your life style, varies in price. That means you might cough up more of that money to buy the same amount of such good. China knows that and would not want its goods to take more money (revaluing)from an American pocket. China does not want its goods to increase in price beyond the reach of the shirtless mass market they are creating right now in Africa, LATAM, Eastern Europe etc. (Those need to forget Sony, Toshiba, Nokia, LG, Smasung, Motorola brands) Once that interplay currency<=>price of goods (on a global scale) is understood we can move further agead to understand deflation/inflation.

To: TobagoJack who wrote (50936)	6/5/2009 12:45:41 AM
From: elmatador	Respond to of 218107

You know that USD in citizens' pocket around the world is going to be worth less and less, else you would not be amassing gold. That USD in the citizens' pocket being worth less, means that to purchase a given good one will need more of that USD to buy it. That is inflation. That -above- is not demand inflation, mind you. Demand inflation is the Brazilian economy overheating and the economic agents demanding more money for a given good or service. Deflation is demand related. There are more goods than people with USD to buy them. That is what wee have witnessed just recently as inventories worldwide needed to be sold at any price once the Great Unwinding unfold. To sell them, sellers have to drop the prices of those goods. On top of that there is over capacity (there's been overcapacity even before China rose). The only way to return to normal is closed down overcapcity and bring industrial production back in line with the demand. While overcapacity is being trimmed, there is deflation. Note that as overcapacity is trimmed, there is joblessness and less salaries to feed the pockets of consumers for them to buy goods. Thus lessening demand further.