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alstry (35.03)

Demon....It is now time for Deflation

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September 07, 2008 – Comments (6)

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

Thomas Jefferson

http://wiki.monticello.org/mediawiki/index.php/Private_Banks_(Quotation)

Watch interest rates skyrocket to the moon.

6 Comments – Post Your Own

#1) On September 07, 2008 at 10:35 PM, daayoo (< 20) wrote:

Alstry,

I have a friend at work who still has a 5 year adjustable on his house. I have been warning him for 6 months to get in a fixed loan. I tried man. You can lead a horse to water......

The rally will not last long.

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#2) On September 07, 2008 at 10:53 PM, alstry (35.03) wrote:

Think about this.....the bailout is going to cost HUNDREDS of BILLIONS and tax receipts are evaporating.  Foreigners, are going to demand high interest rates on our government treasuries to support our weakening coverage ratios.  Interest rates will skyrocket driving prices down even further.

And now the Autos want to borrow $50 billion more and they can't even pay the current outstanding debt????  Can you imagine the interest rate demands when we start KNOWINGLY borrowing on deals like this???

How long before the 10 year crosses 6%???  A lot sooner than many think.

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#3) On September 08, 2008 at 12:20 AM, AnomaLee (28.88) wrote:

Foreigners, are going to demand high interest rates on our government treasuries to support our weakening coverage ratios.  Interest rates will skyrocket driving prices down even further.

I'm doubting the odds of this occuring anytime soon, but our actions could lead to this even years later.

1. Do you think our financial troubles are occuring in isolation?

OR

2. Do you believe you've gained a superior realization over entire nations?


1. You need to look over the waters first and realize that this is a cyclical downturn. We're watching a collapse to the "age of globalization" that has been cheered for the past decade.

Now, governments around the world are trying to stimulate their economies by nationalizing and absorbing non-performing assets and issuing new debt. 

Is that deflationary?

I'll list the 10 largest economies which account for over 60% of world GDP(nominal) and ask what is so different between them?

United States
Japan
Germany
China
U.K.
France
Italy
Brazil
Canada
Spain
Japan
China


Let's throw India in that mix too...

Please discuss any economy listed that is growing in real terms. Governments are the issuers of fiat money. The value of fiat money is created by government. Deflation must occur over a long period not just a few months or even two years. Sure, commodities have corrected over 30% but this has happened several times of the past 10 years so I don't think this proves the "theory" of Mish Shedlock cheerleaders. You'd have to argue that it is a governments interest to allow deflation.

You can't argue that the nationalization of two GSE's with $5 trillion of assets is deflationary. 

If you don't understand how long-term inflation has continued because of government actions or differentiate between a correction and deflation then I suggest you end your arguement for deflation or grab a dictionary and stop repeating what you read from Mish Shedlock.

You can't argue that the nationalization of two GSE's with $5 trillion of assets is deflationary. 

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#4) On September 08, 2008 at 9:15 AM, alstry (35.03) wrote:

Now, governments around the world are trying to stimulate their economies by nationalizing and absorbing non-performing assets and issuing new debt. 

Is that deflationary?

Yes, if assets are deteriorating FASTER than new debt is being issued.  That is the simple analsyis.

You can't argue that the nationalization of two GSE's with $5 trillion of assets is deflationary.

At this point, no one knows either way....if they make it harder to get a mortgage....it will be deflationary....if it becomes easier to get a mortgage.....it will be inflationary.

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#5) On September 08, 2008 at 10:15 AM, AnomaLee (28.88) wrote:

"

Now, governments around the world are trying to stimulate their economies by nationalizing and absorbing non-performing assets and issuing new debt. 

Is that deflationary?

Yes, if assets are deteriorating FASTER than new debt is being issued.  That is the simple analsyis.

You can't argue that the nationalization of two GSE's with $5 trillion of assets is deflationary.

At this point, no one knows either way....if they make it harder to get a mortgage....it will be deflationary....if it becomes easier to get a mortgage.....it will be inflationary."


LOL, are you serious alstry? 

"if it becomes easier to get a mortgage.....it will be inflationary."

What steps were just taken alstry in the mortgage industry? LOL

 This is just as ridiculous as the backpeddling by Mish Shedlock on inflation (whom you seem heavily under the influence)...

Mish Shedlock will say something to the similar --- "We'll experience deflation unless the government decides to promote inflation by lowering interest rates and printing money. Oh by the way... Buy some gold"

Does this all depend on whatever alstry has decided deflation to be? How many instances in the history of economics can you find to support this?

Was this true during the 1970's?
 No....

Was this true immediately following the collapse of the Nasdaq bubble?
No...

No one working believes in inflation. Just because oil has corrected nearly $40 from an ALL-TIME HIGH does not mean we are facing deflation opposed to a correction.

We're still averaging $40 higher than we were ALL OF LAST YEAR. Are you telling me that oil is going back to $65-70 alstry? Deflation would mean that asset classes would need to crash throughout the entire system over a longer period of time. Otherwise, I could pick an assortment of asset class that declines every year and scream "DEFLATION!!!"

Most of know you think the S&P is going back to 500 and real estate ready to drop another 6000% from peak? But, are you saying oil is going to $20 a barrel? How about $40?  Because, that is what would happen in a deflationary spiral.... 

Deflationist arguements are like mushrooms that keep popping up throughout the year.

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#6) On September 08, 2008 at 11:07 AM, DemonDoug (92.48) wrote:

gold is up over 100 bucks YOY also. doesn't seem too deflationary to me.  meanwhile the SPY is down 12%.  So gold up 16%, SPY down 12% - to me that also means that paper assets are being devalued that much faster than the currency used to buy those assets

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