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alstry (35.03)

How Low Will DEFLATION Go????

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December 24, 2008 – Comments (8)

New Jobless Claims Jump to 26-Year High

Consumer spending posts fifth monthly drop, income contracts

Durable goods drop 1 percent in November

Oil falls towards $37, tracking global equity losses

U.S. Nov. PCE core inflation unchanged at 0.0%

 

Are we now at the inflection point???  With prices falling even at the core??????  Don't worry, I know.....Gold can still be a relatively decent hedge against deflation.......but I doubt it compared to the dollar.  Most jewlers today are in the gold buying business....not the gold selling business.  We will see in the next three to six months whether the recent run up in the price of gold was a cycle spike or the foundation for continued upward movement??

At this point, no one really knows, but some like to tell you they do.......we all have our biases in life........and the differences my friends......isn't that what makes it A Wonderful Life.

FWIW, if it really is deflation, paying off debt and building savings would not be bad advice.  Merry Christmas.

8 Comments – Post Your Own

#1) On December 24, 2008 at 10:35 AM, GNUBEE (25.51) wrote:

I think price declines from deflation will fall just short of where they should be.

And I'm with you that this is a necessary part of the system. People willing to spend $65 for a pair of jeans mean that I have to pay $65 for jeans too (well not really), and that $75 jeans are right around the corner. Price inflation needed to be reigned in. And what better way than capital destruction!

It really will punish low cost foriegn producers the most. Are there many low production cost goods made in the US? (many, not any). Not making things in the US anymore might actually be a good thing. As long as those things are not necessary for survival.

Hopefully after this purge people will learn to live with less, spend smarter and actually be able to live on their wages.

And P.S., don't let those telling you to stop being a broken record to influence you. If someone does not think that it's good to know when a company cuts thousands, or tens of thousands of workers they are doing themselves a disservice.

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#2) On December 24, 2008 at 10:54 AM, alstry (35.03) wrote:

Gnubee,

Becareful about your view on America....we were able to function without making much because we borrowed up the difference.....not that our rich uncle is being the Grinch and not fronting us anymore cash.....things could get a lot more difficult than many are currently contemplating.

Re to your PS:

I blog for myself.  I am obnoxiously consistent because that is a personality trait of mine.  I blog with the goal hoping someone can change my mind through socractic hand to hand combat......to date no one has come close and I have been dead right.  There is no gun to anyone's head to come up and play against me.....it is just that I think I am the quickest and most accurate.

If you have any doubts, my blogs going back to February are archived and public for anyone to see.

PPS....

If the interactions and contents can help others.......all the better.  Merry Christmas and Happy Holidays to all.

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#3) On December 24, 2008 at 11:05 AM, tdoodler (24.73) wrote:

Merry Christmas - and I really appreciate your blogs.  (ps one of the things I noticed of late is that people are beginning to think its better to delay the purchase - because things are getting cheaper - a potentially dangerous notion)

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#4) On December 24, 2008 at 11:14 AM, GNUBEE (25.51) wrote:

The things I am thinking about are anything that one can live without. So anything from dollar store trinkets to Plasma's fall on that list.

Necessary:

Food- Our farm to market system is heavily dependent on oil (push comes to shove we still have enough domestic to fertilize and deliver food to ourselves) If it means North Korea gets none of our surplus and we live on Gruel, so be it. My opinion, We will not starve.

Shelter: There's a glut of homes, they just need to be affordable (thank you price deflation)

Clothing: This is the only basic need that cannot be currently met. So We'd all be wearging out our tattered junk of an old navy sweatshirt until we can make our own textile industry.

So Squatting in a forclosed home, eating gruel 3x day, in newly found (in the back of our closet) parachute pants is the worst I see it getting. But yes worse.

Being cut off from credit is bad, but if extending credit is the only way China can keep thier massive masses employed, they will. So I see the current set up as bad, yes, but I cannot see a future where things are that much different. If prices of every part of the system decline relative to each other, nothing has changed. 

Well maybe one thing--- less zero's.

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#5) On December 24, 2008 at 1:57 PM, Entrepreneur58 (35.76) wrote:

How low will deflation go?  Well, deflation is debt destruction, so if it goes long enough it will mean the collapse and default of treasury bonds.   If treasuries default, paper money will be worthless, so you'd better not hoard your dollars for too long if you are expecting deflation to continue.  P.S. - if we have inflation, your paper money will become worthless also.  All roads sort of lead to the same place, don't they?

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#6) On December 24, 2008 at 2:13 PM, OtherOracleOfOMA (33.46) wrote:

Disinflation will persist until 2-3 quarters after there's a substantial ($1 trillion, bare minimum), direct fiscal stimulus package passed. I'm guessing we're looking at about another year of negative growth for the price indicies.

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#7) On December 24, 2008 at 3:16 PM, Harold71 (22.69) wrote:

Entrepreneur58 has echoed my thoughts.

If you are expecting "deflation" in the US economy (I most certainly expect debt defaults to continue for years), that, in the end, is going to be bad for the dollar, which has an "inflationary" effect.

If everyone is broke, how do you expect to pay for the government's wars (easily the worst use of funds -- wars are non-liquidating debt), the infrastructure projects, and the rest of the bloated Gov't, not to mention Social Security and Medicare?

At this point, no one really knows, but some like to tell you they do

Wow, this sounds an awful lot like FloridaBuilder.  "Nobody knows, nobody can know."  Just because you don't know, doesn't mean some people don't know.  There's no reason to be ignorant of the fact that some people understand exactly what is happening, and that actions in the past will continue to dictate future events. If people paid attention we would all realize that there is indeed a plan for everything -- there is a plan for your life and the world's events.  These "course influences" are so strong, they are ignored at your peril.

Invest with inevitability.  The paper US dollar is going to go down (way down) or be replaced.  Just like the stock market crashing...these are predictable predictions.

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#8) On December 25, 2008 at 12:48 AM, DMillsap (21.13) wrote:

"Invest with inevitability.  The paper US dollar is going to go down (way down) or be replaced.  Just like the stock market crashing...these are predictable predictions."

 

What is one to do in order to save or soon to be worthless dollar other than investing in gold? Foreign Currencies?

 

 

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