The truth about deflation - Eric Janszen

[jcole]

Re: The truth about deflation

Greetings, I am new to itulip and quite new to all of this--just wanted to say hello & observe for some time, actually joined due drop in investment portfolio & interest in gold investments--reading Americas Bubble Economy--a bit late on the scene, I believe.
Jane

[Rajiv]

Re: The truth about deflation

Yes the deflation is primarily in the US$ Zone, and perhaps the yen zone

Let us see California

Then



Now

From http://www.californiagasprices.com/

Regular Gas	Midgrade	Premium	Diesel Fuel
Lowest Regular Gas Prices in the Last 48 Hours

Price	Station		Area	Time	Thanks
	Costco		Vacaville	Thu 6:00 PM	wtb955
	1051 Hume Way near Peabody Rd
	Bonfare		Vallejo	Thu 6:40 PM	E430
	2240 Sacramento St & Redwood St
	Bonfare		Vallejo	Thu 6:40 PM	E430
	2817 Redwood Pkwy & Admiral Callaghan Ln
	Marin Market		Vallejo	Thu 9:48 AM	E430
	200 Marin St & Curtola Pkwy
	Costco		Visalia	Thu 1:00 PM	jep39
	1405 W Cameron Ave & S Mooney Blvd
	USA Gasoline		Red Bluff	Thu 9:11 PM	graybeard77
	440 S Main St & Diamond Ave
	Valero		Hanford	Thu 7:15 PM	LesFillin
	527 E 7th St & N East St
	Valero		Hanford	Thu 7:15 PM	LesFillin
	629 W Grangeville Blvd & N 11th Ave
	Shell		Hanford	Thu 7:15 PM	LesFillin
	620 W 7th St & N 11th Ave
	Bangar's Food Gas & Liquor		Hanford	Thu 7:15 PM	LesFillin
	711 E Lacey Blvd & 10th
	Costco		Lancaster	Thu 8:45 PM	Redline8000
	1141 W Ave L & 10th St West
	Handi Spot		Anderson	Thu 12:00 PM	MadStitch
	2700 Northway St & North St
	Costco		Chico	Wed 6:48 PM	chicoCA
	2100 Dr Martin Luther King Jr Parkway near E 23rd
	Mobil		Hanford	Thu 7:13 PM	tally3
	1685 N 10th Ave & E Grangeville Blvd
	Steve's Git-n-Go (Cash)		Visalia	Thu 12:25 PM	smredtru
	1929 S Central & near Walnut

Also

Unleaded Gasoline Average Prices
California		USA	Trend
Today Yesterday One Week Ago One Month Ago One Year Ago	2.898 2.956 3.192 3.629 2.909	2.505 2.545 2.768 3.586 2.761

[phirang]

Re: The truth about deflation

Okay. You say what is happening now is deflation. Then what would you call what happened in the early 1930's?

Or are you one of those that insists that 2008 is a replay of the 1930s?

Wow, now THIS is truly inflationary:

Banks asking for credit card debt forgiveness
Thursday October 30, 5:31 pm ET
By Marcy Gordon, AP Business Writer Banks losing billions in unpaid credit card bills urge government to forgive consumer debt

WASHINGTON (AP) -- With defaults on credit card debt spiraling amid a global financial downturn, banks already reeling from the mortgage crisis are losing billions more from unpaid credit card bills. Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.

...

http://biz.yahoo.com/ap/081030/meltd...dit_cards.html

[GRG55]

Re: The truth about deflation

I can't find the link to Finster's website at the moment, so I can't quote his explanation, but IIRC the FDI is a comprehensive global measure which includes both domestic and foreign assets priced in dollars, as well as wages. The CPI is strictly confined to domestic consumer prices, and therfore excludes producer prices, foreign dollar denominated assets, wages, etc.

The recent short squeeze on foreign USD has exacerbated the deflation seen in the FDI, while this effect is not even measured by the CPI.

Is this an argument that there is global deflation underway, not just in the US$ zone?

If so, can we hear from any of you iTulipers who live outside the US$ zone and recently watched your currency nosedive off a cliff. How's your purchasing power doing these days. Feel like deflation?

Didn't think so...

[GRG55]

Re: The truth about deflation

It's semantics. Itulip cornered itself by proclaiming earlier that deflation was impossible in USA. Thus deflation is called disinflation on itulip. That's all.

Okay. You say what is happening now is deflation. Then what would you call what happened in the early 1930's?

Or are you one of those that insists that 2008 is a replay of the 1930s?

[metalman]

Re: The truth about deflation

No Metalman - that was Friendly_Jacek you were supposed to be replying to (two posts above). Friendly_Jacek is the diehard skeptic here referring to gold as rising in both inflation and deflation. Friendly_Jacek is the guy with the nice green riffling dollar bills icon (fresh greenbacks)? Sadsack is the guy with the red box avatar, with teeth on it? Stress of events must be getting to you.

Friendly_Jacek.
Friendly_Jacek.
Friendly_Jacek.
Friendly_Jacek.
Friendly_Jacek.
Friendly_Jacek.
Friendly_Jacek.

sorry, sadsack! i meant friendly-jacek.

what's to be skeptical about? a gold standard is a gov't monopoly on gold, pure and simple.

in 1934 fdr said... the dollar is no longer tied to gold for domestic banking.

but is for international transactions, and i hereby proclaim that we will pay you $35 per ounce in trade vs $20. that's 57% inflation. bang... after 3 yrs of deflation.

what's to be skeptical about?

since 2002 the dollar fell 37% against a basket of currencies. same deal, but slower.

very inflationary.

now the dollar is strengthening. guess what the fed is NOT going to do?

wait for 3 yrs of deflation.

anyone who bets the fed will is, how can i put this nicely... stupid.

Re: The truth about deflation

No Metalman - that was Friendly_Jacek you were supposed to be replying to (two posts above). Friendly_Jacek is the diehard skeptic here referring to gold as rising in both inflation and deflation. Friendly_Jacek is the guy with the nice green riffling dollar bills icon (fresh greenbacks)? Sadsack is the guy with the red box avatar, with teeth on it? Stress of events must be getting to you.

Friendly_Jacek.
Friendly_Jacek.
Friendly_Jacek.
Friendly_Jacek.
Friendly_Jacek.
Friendly_Jacek.
Friendly_Jacek.

does make one want to drill a hole in one's head to let the goo out.

sadsack, the reason gold went up is because the government sent it up by raising the price. before 1934 gold was fixed by the gov't at $20, then repriced to $35. gee, why did the price go up during 'deflation'? because the gov't ended the deflation by resetting the price, silly.

itulip says they'll do it again but the modern way... with fiat rather than by fiat.

what don't you get about this simple fact?

[bart]

Re: The truth about deflation

...
In fact if you look at some of the evidence bart and others have pointed out - the government's operations with regards to the dollar's strength/weakness have reversed.
...

I do urge caution on that, given that there are no guarantees that the ESF hasn't taken a page out of the BoJ's yen intervention book and will reverse again this week or next.

Also do take into account on any of my posts that I'm an active momentum based trader and can inadvertently come across with what might look like an intermediate or longer range picture, when I'm actually only looking at it for short term purposes. My average trade is under two weeks long, and recently under a week.

[metalman]

Re: The truth about deflation

I think I'm going a little batty. I have to remember to stay away from windows today or I may end up jumping out of one.

does make one want to drill a hole in one's head to let the goo out.

sadsack, the reason gold went up is because the government sent it up by raising the price. before 1934 gold was fixed by the gov't at $20, then repriced to $35. gee, why did the price go up during 'deflation'? because the gov't ended the deflation by resetting the price, silly.

itulip says they'll do it again but the modern way... with fiat rather than by fiat.

what don't you get about this simple fact?

Re: The truth about deflation

Yes, and the below observation raises the inevitable question - what would global "deflation" look like if the currency that all the liquidating positions were running into was other than the USD. The answer to that is, that the FDI would likely be recording a lot more diluted a "deflation", hence the FDI may be tracking a USD event to a greater or at least equal extent, than it is tracking a purely deflationary event?

I can't find the link to Finster's website at the moment, so I can't quote his explanation, but IIRC the FDI is a comprehensive global measure which includes both domestic and foreign assets priced in dollars, as well as wages. The CPI is strictly confined to domestic consumer prices, and therfore excludes producer prices, foreign dollar denominated assets, wages, etc.

The recent short squeeze on foreign USD has exacerbated the deflation seen in the FDI, while this effect is not even measured by the CPI.

[sadsack]

Re: The truth about deflation

On the first chart, it looks like the most recent rate of inflation got down to about -2%, and has since increased to close to 0. This really was the gist of my original question: How does that reconcile with Finster's FDI at negative thirty something? I know they measure somewhat different things, but it seems like night and day.

I can't find the link to Finster's website at the moment, so I can't quote his explanation, but IIRC the FDI is a comprehensive global measure which includes both domestic and foreign assets priced in dollars, as well as wages. The CPI is strictly confined to domestic consumer prices, and therfore excludes producer prices, foreign dollar denominated assets, wages, etc.

The recent short squeeze on foreign USD has exacerbated the deflation seen in the FDI, while this effect is not even measured by the CPI.

[c1ue]

Re: The truth about deflation

F_J,

Clearly you are disappointed in your recent investment choices, but try to keep an objective view on what you have seen on iTulip.

There is a clear definition of deflation - as opposed to disinflation - listed in the glossary.

I and others have also pointed out the $60-ish/barrel of oil is still equal to/higher the highest price for oil ever prior to 2007...last year.

Certainly there has been a huge drop vs. the peak, but the jury is still out as to whether $1.50 gasoline and $20 oil is on the way.

In fact if you look at some of the evidence bart and others have pointed out - the government's operations with regards to the dollar's strength/weakness have reversed.

By iTulip definition, then, what we're seeing right now cannot be Great Depression type deflation if the government can so quickly and easily get out of it.

It is certainly your choice to continue to try and poke holes in the iTulip thesis - it is a healthy activity - but try to at least put together more credible arguments.

If, for example, you took the position that the US would still be able to get others to support American deficit spending via threatening mayhem - a la the Kim Il Sung/Kim Jong Il school of negotation, that at least is plausible.

[friendly_jacek]

Re: The truth about deflation

One of the problems I see on this site that money is defined in a very narrow way. The bigger picture includes credit or debt as money. Sure, money is being printed fast, but the credit is disappearing even faster, thus deflation. As soon as the money printing eclipses credit bursting, inflation. So it is a tug of war. So far, deflation was greater.

BTW, I thought that all itulipers saw the "Money as Dept" movie, but apparently that is not the case:
http://video.google.com/videoplay?do...74362583451279

[Andreuccio]

Re: The truth about deflation

Yes, here it is, right in the government data.

Not as severe as in 2002, 2004, 2006 or 2007 but still noticeable.

The pumping is working to maintain the money supply.

Thanks for the quick replies, Fred. I really appreciate the discourse.

I have a couple of questions on the charts. I'm not trying to be argumentative. I know you're sick to death of talking about deflation. Believe me, at this point, it pains me, too.

On the first chart, it looks like the most recent rate of inflation got down to about -2%, and has since increased to close to 0. This really was the gist of my original question: How does that reconcile with Finster's FDI at negative thirty something? I know they measure somewhat different things, but it seems like night and day.

My second question is in reference to the second chart and the commentary. The chart shows the money supply increasing. Your commentary is that their pumping of money is working. But I keep reading here that it's not just the quantity of money, but also the velocity, that matters, and that the velocity part of the equation has broken down. So my question is, is it really working?

Re: The truth about deflation

I think I'm going a little batty. I have to remember to stay away from windows today or I may end up jumping out of one.

Fred, did you know that gold went up during the great depression even though it was a deflationary spiral?