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TMFAleph1 (94.05)

The Bull 'n Bear on Default, Deflation and Tetris

Recs

11

May 26, 2011 – Comments (7) | RELATED TICKERS: BRK-B , BAC , GLD

Watching this short video from the FT's James Mckintosh, A U.S. Default is No Longer Unthinkable, it really hit me how shambolic and dysfunctional our political leadership is. The sort of brinkmanship that could push us to the edge/ into technical default really isn't useful, to put it mildly. Given the amount of hidden risk and uncertainty in the financial system, who knows what effects an unprecedented event of this sort could trigger? It could well accelerate our creditors' efforts to diversify out of the dollar, for example, thus diminishing its role as the world's reserve currency. While that process is inevitable, and even desirable, over the long term, this surely isn't the way to go about it. That's just a relatively benign effect I can think of -- one can easily imagine siutations that are much more alarming.

Are we on the berink of the double-dip recession that never materialized last summer? I'm increasingly willing to believe that. I find it astonishing that some people are constantly going on about the perils of inflation. That's clearly a medium-term risk -- worth thinking about, certainly, but not the most pressing risk on the table. According to this article, the long-term historical record analyzed by Jim Reid -- one of the few analysts worth listening to -- suggests that, weak as the recovery has been, the economic cycle is actually peaking. Whether or not the historical record applies to the current circumstances is a matter for debate, but it is a guidepost.

Enough of the doom-and-gloom, here is something less weighty and more fun. Take a look at the play of this Tetris Grandmaster. Not that it is necessarily the best use of one's time, but it is a display of the human mind/ body achieving a level of performance that is so far beyond the average that is barely possible to comprehend it. Talk about muscle memory! Hat tip to Felix Salmon for the link.

Enjoy your day!

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7 Comments – Post Your Own

#1) On May 26, 2011 at 4:31 PM, PeteysTired (< 20) wrote:

I find it astonishing that some people are constantly going on about the perils of inflation.

Why do we go on about inflation?  I will tell you why.  I will not get a raise this year.  I was laid off in 2009 and parts of 2010.  My income is flat.  Any increases in prices make me worse off.  Thank the Lord that gas prices have gone down a little, but every increase stings and leaves me with less.

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#2) On May 26, 2011 at 4:44 PM, TMFAleph1 (94.05) wrote:

@PeteysTired

I hear you and I'm sorry to hear that is your situation. However, I'm not referring to informal conversations with people about how inflation affects their personal situation, I'm referring to professional commentators and market participants who are discussing the immediate risks to our economy. I think inflation is a serious risk that merits discussion, but it is not the primary risk we are facing today.

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#3) On May 26, 2011 at 4:56 PM, PeteysTired (< 20) wrote:

Thanks for the support.  I will make my own way in this world :)  What I don't understand is:

1) Why can't we have a bunch of deflation in the things people buy?

2) Why didn't we have defaltion for the things people buy everyday during the recession...I guess we had a little, but now things are definately more expense for everyday items?

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#4) On May 26, 2011 at 5:09 PM, TMFAleph1 (94.05) wrote:

 Why didn't we have defaltion for the things people buy everyday during the recession...I guess we had a little, but now things are definately more expense for everyday items?

We must have had deflation in at least some of the thing people buy everyday; Wal-Mart lowered prices on 10,000 items in 2010, for example.

Here is an article that describes some of the reasons for which it is very difficult for us to perceive deflation (particularly relative to inflation): Seeing Inflation Only in the Prices That Go Up, NYT, May 7, 2008.

All the best!

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#5) On May 26, 2011 at 8:05 PM, XMFSinchiruna (28.54) wrote:

Aside from the specific part about inflation not representing a significant risk that could escalate substantially in the blink of an eye within the scenarios you contemplate above (surely our disparate definitions of inflation account for much of the impasse there, since the inflation I am concerned about is currency-driven, cost-push inflation), it is both welcome and refreshing to agree so substantially with a post of yours. There is common ground; and that's important.

Thanks for sharing your thoughts!

 

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#6) On May 26, 2011 at 8:50 PM, TMFAleph1 (94.05) wrote:

[...] it is both welcome and refreshing to agree so substantially with a post of yours. There is common ground; and that's important.

Ha ha ha... I never doubted it. ;-)

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#7) On May 27, 2011 at 11:36 AM, JaysRage (93.90) wrote:

For all the reasons that you state above, there is no reason to expect a rate increase.....rather further quantitative easing will continue and the seeds of currency-driven cost-push inflation will continue.  

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