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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (36382)	8/18/2009 9:16:59 AM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 71588

Re: "The actions during a downturn, even an deflationary one, can set up up for inflation later. Unlike snow in Death Valley, all the extra money thrown in to the system isn't going to disappear on its own." Yes, but you are not arguing for 'predestination' are you? That the future is 'inevitable'? (During the interim period, while actual deflation reins as it does now, or even somewhat later when it's simply 'disinflation' that prevails... the Central Bank is likely to have ample opportunity to 'mop-up' the massive amount of funding that it has injected into the banking system in it's attempt to forestall a new 'Great Depression' before any 'inflationary cycle' can get started. Possibly even some years in which to do so....) ESPECIALLY when considering the fact that all of the injected capital (to date) has been SUBSTANTIALLY LESS then the amount of liquidity that has been WITHDRAWN from the system by banks cutting back on lending, and consumers refusing to spend. The Velocity of money is way down in this crisis, not up. (In other words: for ALL the MONEY that has been injected by government actions... FAR, FAR MORE has already been WITHDRAWN by markets and private actors. Which explains why DEFLATION is the condition now, not inflation.) And which also means that there is clearly time yet to make adjustments (withdraw injected liquidity) to fend off the possibility of any excessive future inflation. (Actually right now though, in these current deflationary times, a smidge of inflation would be a welcome sign sez all the bankers.... If deflation truly grabs hold of the economy it is apt to become a self-reinforcing deflationary cycle --- far, far worse then modest amounts of inflation for any economy... and we could even wind up with an entire "lost decade" of economic growth like Japan experienced... a far, far, worse thing.)

To: TimF who wrote (36382)	8/18/2009 11:08:31 AM
From: DuckTapeSunroof	Respond to of 71588

Producer Prices in U.S. Decline More Than Forecast (Update1) By Courtney Schlisserman bloomberg.com Aug. 18 (Bloomberg) -- Wholesale prices in the U.S. fell more than forecast in July as energy costs receded, capping the biggest 12-month drop on record and showing inflation will not be an immediate concern for Federal Reserve policy makers. The 0.9 percent decrease in prices paid to factories, farmers and other producers followed a 1.8 percent gain in June, the Labor Department said today in Washington. Excluding food and fuel, so-called core prices unexpectedly fell 0.1 percent. A record amount of excess capacity will prevent production bottlenecks from developing, indicating wholesale prices will be slow to recover even as the economy improves. A lack of inflation was one reason Fed policy makers last week reiterated a pledge to keep the benchmark interest low for an “extended period.” “If you have an environment where excess stock remains large and inflation continues to be slow, the Fed will want to keep monetary policy easing,” Michelle Meyer, an economist at Barclays Capital Inc. in New York, said before the report. “The fact you have so much slack in the economy puts downward pressure on prices.”....