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No Deflation! Disinflation then Lots of Inflation - Janszen

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  • #46
    Re: No Deflation! Disinflation then Lots of Inflation - Janszen

    Originally posted by bart
    No - the Treasury is obligated to repay/redeem debt sold to the Fed as much as any debt it sells to anyone else. But in actual practice as you can see in the chart, the Fed keeps buying so repaying doesn't become an issue.

    Yes, the Treasury pays interest to the Fed on the bonds and bills owned by the Fed, to the best of my knowledge.
    Thanks for the comment, bart. This is the first time I can recall anyone having directly addressed that question.

    So (correct me if I'm wrong) what this boils to is that principal repayment - because the net balance owed keeps increasing - never really becomes an issue. Even the debt service is unlikely to as long as the pace at which the Fed buys new bonds exceeds the combined burden of principal repayment and interest payment.

    Aside from the risk of hyperinflationary collapse, this has the potential to continue indefinitely. Or is there some other structural element that could fail first?
    Finster
    ...

    Comment


    • #47
      Re: No Deflation! Disinflation then Lots of Inflation - Janszen

      Originally posted by Finster
      Thanks for the comment, bart. This is the first time I can recall anyone having directly addressed that question.

      So (correct me if I'm wrong) what this boils to is that principal repayment - because the net balance owed keeps increasing - never really becomes an issue. Even the debt service is unlikely to as long as the pace at which the Fed buys new bonds exceeds the combined burden of principal repayment and interest payment.

      Aside from the risk of hyperinflationary collapse, this has the potential to continue indefinitely. Or is there some other structural element that could fail first?

      I've never seen it officially stated anywhere but my assumption, which is borne out by the fact of SOMA almost always rising, is that when the treasuries do mature that the Fed rolls them over.

      As far as another structural element failing first, I haven't given it any thought to speak of but given the at least partially Ponzi nature of the beast, I'm sure there are a few. There's always the full derivatives meltdown that some fear too, although I think that's a low probaility event given the continued success over the decades of "rescue" operations by the Fed and others.
      http://www.NowAndTheFuture.com

      Comment


      • #48
        Re: No Deflation! Disinflation then Lots of Inflation - Janszen

        Originally posted by bart
        I've never seen it officially stated anywhere but my assumption, which is borne out by the fact of SOMA almost always rising, is that when the treasuries do mature that the Fed rolls them over.

        As far as another structural element failing first, I haven't given it any thought to speak of but given the at least partially Ponzi nature of the beast, I'm sure there are a few. There's always the full derivatives meltdown that some fear too, although I think that's a low probaility event given the continued success over the decades of "rescue" operations by the Fed and others.
        The historically-resorted-to "rescue operation" would presumably be the inflationary option. In a manner of speaking, it "worked" in 1933, again in 1971, and (so far) in 2003 ... :mad:
        Finster
        ...

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        • #49
          Re: No Deflation! Disinflation then Lots of Inflation - Janszen

          Originally posted by Finster
          The historically-resorted-to "rescue operation" would presumably be the inflationary option. In a manner of speaking, it "worked" in 1933, again in 1971, and (so far) in 2003 ... :mad:
          There's also the post 9/11 operation which did pretty much succeed in stabilizing the markets too - so not everything the Fred does in Open Market Ops is dark or deserving of tinfoil hat enabled comments. Off the top of my head, I think they injected about $150 billion in a very few days.
          http://www.NowAndTheFuture.com

          Comment


          • #50
            Re: No Deflation! Disinflation then Lots of Inflation - Janszen

            It seems all the foreign creditors ALONG with the US have decided now to
            pump things up all at the same time, thus, no 'begger thy neighbor' policy
            to occur anytime soon. I would think that after the EU actions to prop up
            their banks, we will see the US action done by next weekend for sure, and
            another rate cut in the offing soon for good measure.

            I tell people there will be no deflation and no depression and they look at
            me like I am nuts. How can I know these things can never occur? I tell
            them simly -- all the national gov't around the world own printing presses
            and they are not afraid to use them!

            Incidentally, the prognosis for stocks to continue to dive opver time ignores
            certain segments. I believe that as oil continues to become
            more expensive, stocks in companies that own energy assets will only
            become more expensive. To this lot I add RDS/A, TOT, E, COP, XOM
            etc.

            Comment


            • #51
              Re: No Deflation! Disinflation then Lots of Inflation - Janszen

              CPI-U published monthly by the BLS
              YearJanFebMarAprMayJunJulAugSepOctNovDecAve
              20102.63%2.14%2.31%2.24%NANANANANANANANANA
              20090.03%0.24%-0.38%-0.74%-1.28%-1.43%-2.10%-1.48%-1.29%-0.18%1.84%2.72%-0.34%
              20084.28%4.03%3.98%3.94%4.18%5.02%5.60%5.37%4.94%3.66%1.07%0.09%3.85%
              20072.08%2.42%2.78%2.57%2.69%2.69%2.36%1.97%2.76%3.54%4.31%4.08%2.85%

              Hmm, isn't negative inflation by definition deflation not disinflation?

              Comment


              • #52
                Re: No Deflation! Disinflation then Lots of Inflation - Janszen

                strictly speaking... yes. but it never turned into this...



                as the deflationists told. only this...

                Comment


                • #53
                  Re: No Deflation! Disinflation then Lots of Inflation - Janszen

                  Ah, so the title of this post was meant to read as: No Deflation Spiral! Disinflation then Lots of Inflation - Janszen ;)

                  That's fine by me - I'm rooting for inflation to deflate my debt away.

                  Comment


                  • #54
                    Re: No Deflation! Disinflation then Lots of Inflation - Janszen

                    Originally posted by zenith191 View Post
                    CPI-U published monthly by the BLS
                    YearJanFebMarAprMayJunJulAugSepOctNovDecAve
                    20102.63%2.14%2.31%2.24%NANANANANANANANANA
                    20090.03%0.24%-0.38%-0.74%-1.28%-1.43%-2.10%-1.48%-1.29%-0.18%1.84%2.72%-0.34%
                    20084.28%4.03%3.98%3.94%4.18%5.02%5.60%5.37%4.94%3.66%1.07%0.09%3.85%
                    20072.08%2.42%2.78%2.57%2.69%2.69%2.36%1.97%2.76%3.54%4.31%4.08%2.85%

                    Hmm, isn't negative inflation by definition deflation not disinflation?
                    Is that what you think people were worrying about when they talked about 'deflation?' I envisioned a much more dramatic scenario going on much longer.

                    Comment


                    • #55
                      Re: No Deflation! Disinflation then Lots of Inflation - Janszen

                      Originally posted by zenith191 View Post
                      Ah, so the title of this post was meant to read as: No Deflation Spiral! Disinflation then Lots of Inflation - Janszen
                      Exactly; and this would've communicated the point much more clearly than persevering with the disinflation line when inflation was in fact negative. It just created unnecessary confusion and disagreement; that's my take.

                      Comment


                      • #56
                        Re: No Deflation! Disinflation then Lots of Inflation - Janszen

                        Originally posted by WDCRob View Post
                        Is that what you think people were worrying about when they talked about 'deflation?' I envisioned a much more dramatic scenario going on much longer.
                        You are correct, in that when people were talking about 'deflation' they meant 'deflation spiral'. However, I think iTulip would've been better served by simply stating no 'deflation spiral' instead of using the word disinflation; to me, no 'deflation spiral' communicates much more clearly the point iTulip was making, instead of using the word disinflation.

                        It may just be me, but I think iTulip have realised this.

                        Comment


                        • #57
                          Re: No Deflation! Disinflation then Lots of Inflation - Janszen

                          Originally posted by WDCRob View Post
                          Is that what you think people were worrying about when they talked about 'deflation?' I envisioned a much more dramatic scenario going on much longer.

                          Now add at least 3-5% (if not 6-7%) to those numbers to account for all the BLS BS in the false CPI statistics.

                          *That* is the disinflation to which iTulip refers - there was zero, nada, zip actual deflation.
                          http://www.NowAndTheFuture.com

                          Comment


                          • #58
                            Re: No Deflation! Disinflation then Lots of Inflation - Janszen

                            Originally posted by Down Under View Post
                            You are correct, in that when people were talking about 'deflation' they meant 'deflation spiral'. However, I think iTulip would've been better served by simply stating no 'deflation spiral' instead of using the word disinflation; to me, no 'deflation spiral' communicates much more clearly the point iTulip was making, instead of using the word disinflation.

                            It may just be me, but I think iTulip have realised this.
                            I kind of agree, but 'spiral' was said from time to time and it was always clear to me what they meant (and, honestly, I'm enough of a novice at this that if it was clear to me it should have been clear to all).

                            I appreciate precision with language (a lot), but I just don't understand the need to try and bust someone's balls when they were, at the end of the day, right about something that so many others were not.

                            Comment


                            • #59
                              Re: No Deflation! Disinflation then Lots of Inflation - Janszen

                              Originally posted by Down Under View Post
                              However, I think iTulip would've been better served by simply stating no 'deflation spiral' instead of using the word disinflation
                              The (in/de/dis/hyper/.../flation) controversy serves our understanding poorly in my view.

                              Moderate price changes in the cooked CPI numbers do not tell us the major points we need to know.

                              We are not fundamentally dealing here with too much or too little fiat money in circulation. Prices are mostly moving only moderately one way or the other, depending on production volume (lower volumes require higher per-unit prices to cover fixed costs), financing availability and balance sheet health (weak balance sheets and limited financing options require higher prices to stay out of bankruptcy), and various other shifting factors. Meanwhile asset prices are either shell shocked (real estate) or on Plunge Protection Team steroids (stocks.) Personal incomes are either holding steady (no raise) or devastated (out of work), with no more "ATM machine" to fund the difference from one's increasing home equity.

                              The essential problem is that an absolutely monstrous pile of derivatives was built on top of a huge pile of debt, temporarily masking huge systemic risk. That Debt and Derivative Death Star is imploding, leaving black holes on the balance sheets of many individuals, corporations, governments (local, state and national), GSE's (Fannie, et al), pension funds and hedge funds, and leaving potholes in most of the remaining balance sheets. The stunning increase in the size of the Federal Reserve's balance sheet (and related off-book balance sheets, such as I presume behind the curtains at Maiden Lane, Goldman, JPMorgan and Blackrock) does not represent some vast influx of circulating currency in the economy. Rather it is evidence of the double entry bookkeeping shenanigans being done in an effort to fill in these black holes and potholes.

                              The idea that the major event going on is that the Fed is printing fiat dollars which are causing strongly rising inflation, risking hyperinflation is missing the point (at least for now.)

                              Companies are raising prices a little and reducing quality and package sizes a little more, mostly in an effort to keep from going belly-up in the face of declining sales volumes, devastated balance sheets and tight commercial lending.

                              We may get to some serious fiat money inflation or hyperinflation, or not. This may happen sooner or later. We live in stormy financial times. But that's not where we are now (outside of a few isolated places such as Zimbabwe I suppose.)
                              Most folks are good; a few aren't.

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