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alstry (35.68)

Alstry's Deflation Perspective Catching On

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October 05, 2008 – Comments (7)

Oct. 6 (Bloomberg) -- As Federal Reserve Chairman Ben S. Bernanke and his global colleagues fight the worst financial crisis since the 1930s, one danger is looming larger by the day: deflation.

With asset markets tumbling, commodity prices plunging the most in 50 years and banks keeping a tighter grip on credit, the ingredients for a sustained period of falling prices are coalescing. While inflation is still a concern for many policy makers only months after oil and food prices peaked, the risk is their patchwork of rescue and stimulus packages will fail, and prices will start to fall throughout the broader economy.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aD24rTsF1jwE&refer=home

It ain't too hard folks....credit/debt is money......if you don't believe me just take a look at a dollar bill and see what it represents.  For a while now I have quantified that debt is being destroyed much faster than credit is being created.  Net Net money supply is decreasing and now prices are beginning to tumble.

First they tumbled in assets and now they are tumbling in commodities.  Can this reverse??  Absolutely and very quickly.  But for the meantime....Alstry's deflationary perspective is likely to gain some  tailwinds.....and just when  everyone is singing my song.....get ready for me to change course.

7 Comments – Post Your Own

#1) On October 05, 2008 at 7:57 PM, awallejr (80.12) wrote:

Except you don't factor in the issue of a doubling of the world population in a measely 40 year time span, and the demand that will put on natural resources.  We already used up the good stuff.

We better get ready to start mining the Moon or Mars, because we are running out here.

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#2) On October 05, 2008 at 8:33 PM, alstry (35.68) wrote:

In addition to States and Local Governments running out of money.....get ready for pension funds to run low on assets.

No matter how large the population....no money....no purchasing power.  There are lots of people starving around the world....with less money....it will only add to an already distressing situation.

It continues to amaze me how some people think an increase in population will necessarily lead to an increase in sales or prosperity.  Certainly demand will increase....but whoever said demand equates into higher sales????

Just because people demand more, doesn't mean they have the capacity to pay more.  Noodle companies in Japan saw their sales drop 20% when they raised prices....noodles are a staple item in Japan.

Right now money is evaporating faster than it is being created....the net result will be deflation unless the process reverses....which it can on a dime.....we will just have to wait and see.

 

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#3) On October 05, 2008 at 8:44 PM, nuf2bdangrus (< 20) wrote:

I agree.   It took me too long to catch on with an investing thesis, because those of us who watch this know the Fed will hyperinflate at some point to pump money through the system, the end decision is that it is better to pay off debts with worthless dollars than to let them be unpaid with no dollars.  So for now, the weak currencies get stronger, and the strong currencies get weak.  Twisted logic, no?  Cash is a good holding, and iw ish I came to that conclusion before the last 4 months of losses,w hich have been devastating.  Luckily, I have moved enough holdings to cash to nibble on thigns on the way down, my favorite themes being energy, food, metals, and currencies.  Energy is in effect currency, and Nat gas the energy of the future.  Solar and Wind beyond that, the solar fad having passed, at some point will be good buys.

 

I can't bring myself to go long the US dollar, and enough of my investments are dollar short in nature that when it weakens, I will do better.

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#4) On October 05, 2008 at 10:09 PM, goldminingXpert (30.97) wrote:

come on people, stay in the inflation camp so I can take your money. Every sucker that buys into a Goldcrap (GG) or Gold ETF is artificially boosting the price so I can short into it. If gold goes down to $600/oz, my gravy train of shorting every gold pop is going to run dry.

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#5) On October 05, 2008 at 10:19 PM, alstry (35.68) wrote:

FOR THOSE THAT THINK ALSTRY EXAGERATES 

The struggling economy continues to hit Main Street hard. More and more families are losing their homes, forcing some to live on the streets. News 3's Dan Ball explains why the number of homeless families are dramatically increasing here in Las Vegas.

Catholic Charities says they've noticed that within the last several months, the face of the homeless has changed. It isn't just the single male sleeping on the streets anymore. Now, it's the family who was once living on easy street.

"Mary" is a mother of three. She and her husband both have jobs, a large mortgage, and a car payment. And, like many valley residents, they are just trying to make ends meet.

"Bills were due - we just needed a little help for today," says "Mary." "It's costing us more because we have a $1,295 mortgage, car note, kids expenses, diapers..."

Phillip Hollon with Catholic Charities says their role of helping only those people without shelter has drastically changed over the last year.

"Last year at this time, we were serving about 50 families on any given day. Now we're serving about 150 families on any given day," explains Hollon. "‘It's a very different clientele than we've seen in the past. Many years ago, people were on the street walking to us. Now they're driving to us."

Because of the housing crash, high gas prices, and inflation, more and more families are asking for help. And some are even ending up on the streets.

"The types of individuals we're seeing are struggling to make ends meet," says Hollon. "They're forced into making decisions - whether they can pay their rent, or their car payment, or putting food on the table."

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#6) On October 06, 2008 at 1:22 AM, StatsGeek (29.98) wrote:

There is massive deflation in asset prices, which is going to continue for a long time.

But the government can't and won't let everybody file for bankruptcy and lose their homes, so the government will flood the system with dollars until most people can afford to pay off their debts in nominal terms.  Which means hyperinflation and a complete lack of trust in paper and electronic money.  Gold will eventually skyrocket and then the government will confiscate it again as it did in 1933.  If you're not aware that the U.S. government made it illegal for individuals to own gold from 1933 to 1970-something, then you should be boning up on your economic history.  The U.S. will also default on its bonds in the next 5 years.

 

 

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#7) On October 06, 2008 at 1:50 AM, mliu01 (< 20) wrote:

deflation? yea, how long can that last???

Govt will keep running. As long as govt keep running. Hyperinflation is the destiney.

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