Comments on: Flaws in the Deflation Case

By: TR

TR — Mon, 08 Mar 2010 10:08:22 +0000

“We’re not going to monetize the debt,” Mr. Bernanke declared flatly – 25 FEB 2010

Deflation it is.

By: Peter Boockvar Debunks Deflationistas

Peter Boockvar Debunks Deflationistas — Thu, 25 Feb 2010 18:39:53 +0000

[...] Good Tech Ticker clip featuring Peter Boockvar explaining why any deflation/disinflation will inevitably lead to more easing and ultimately inflation. I discussed this at length last year in Flaws in the Deflation Case. [...]

By: More Details on Bernanke’s Meddling

More Details on Bernanke’s Meddling — Tue, 20 Oct 2009 16:06:00 +0000

[...] coming, that the economy was looking good (and why not, when they’re pumping trillions?). See Flaws in the Deflation Case for more on the general concept, though it is a little [...]

By: David Rosenberg on Inflation, Gold, and Market Fundamentals

David Rosenberg on Inflation, Gold, and Market Fundamentals — Fri, 18 Sep 2009 03:44:22 +0000

[...] and plenty of book-cooking via changes to accounting rules and inflation data. See Flaws in the Deflation Case for [...]

By: US and Japan Bear Markets Compared: 1929, 1989, 2000 & 2007

US and Japan Bear Markets Compared: 1929, 1989, 2000 & 2007 — Tue, 11 Aug 2009 05:21:07 +0000

[...] following in Japan’s footsteps. I don’t agree with the sustained-deflation argument, as stated here. But a lot of smart people do think our “eternal life-support for zombie-banks” [...]

By: Adam Sharp

Adam Sharp — Thu, 23 Jul 2009 18:28:20 +0000

Scott – that’s the right question. Not sure of the answer, though. Inflation seems inevitable. I like metals, but mostly just cause I hate the market. Stocks are very expensive right now, P/E of around 134 on the S&P 500. That doesn’t mean they won’t go up, because of manipulation and “creative” accounting.

If you have the motivation, building some sort of business if probably the best investment. Even if it’s just in your spare-time.

By: Scott Clous

Scott Clous — Wed, 22 Jul 2009 17:10:45 +0000

How to invest then?

If things are going to get worse, maybe now, maybe later…

If holding on to cash were any kind of answer, we’d consider it, but it’s not there are some places that will pay to hold through the next few years — useful commodities, oil, natural gas, only because people will continue to drive to work, heat their houses.

I’m looking at stocks for such a long term, they still appear attractive, if as you so wisely point out, we don’t have further game changing manipulations by government.

We will, so what are the choices left on the table? At a dinner party last Christmas folks told me how they had pulled their retirement funds out at the top of the summer. They were going to sit it out. I don’t know if they ever got back in. Meanwhile, in some areas, again international relative to US markets, some funds and ETFs have returned 30-40% YTD.

But if we learned nothing else in 2008, no equity market is an island. Trying to find a good counter weight, we have the gold bugs, but with only limited usage — and I think that ship has sailed.

Owning real estate, cumbersome, but perhaps fun and the only hedge to the kind of inflation that has to come, 1970’s, at the very least, in light of all the games coming from our elected teams in DC.

Loved the post, keep it up.

By: misanthropope

misanthropope — Fri, 10 Jul 2009 07:40:06 +0000

there’s an important distinction between the debt laden companies that will get boosted and the ones that will get crushed- which is most of them, IMO. in one word, “refi”. the trend in the past 20 years has been to view short term obligations is purely _better_ (for the debtor) than longer term ones. hey, the difference in interest rate must be free money with no tradeoff, right? you gotta go B-School to get THIS kind of stupid.

plenty of companies have blown up (REITs, BDCs, and oh yeah, the investment banking industry) because although they could easily service interest, their assumption of being able to roll over the principal proved reckless.

By: Unemployment Predictions for 2010

Unemployment Predictions for 2010 — Tue, 30 Jun 2009 00:33:17 +0000

[...] in the long-run. But that doesn’t change the fact that it is highly unlikely, as I argue in this piece. So even bigger deficits and sustained inflation seem very likely a few years down the road. Those [...]

By: Robert in Houston

Robert in Houston — Wed, 24 Jun 2009 19:53:54 +0000

IFF they can, officials will inflate. It is an easy and popular choice, and the consequences can be blamed upon others.

The problem is, it is pushing on a rope. The banks won’t & can’t lend, so the marginal fractional-reserve multiplier is zero or negative. So the “excess reserves” and even the money supply numbers have become currently _meaningless_

Sure the UST can and will cut checks. But most of the small ones are to the usual payees (Soc.Sec et al) and not getting bigger. Ditto taxes. They _are_ cutting many more big checks, but those are for bailouts and few are for shovels. The bailout checks are used to paper over losses whose inflationary effect was in the past.

But there still are people with discretionary income & savings. They, plus shovel injections will eventually ignite inflation.