Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

[FRED]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

if I understand correctly the chart is NOT the theory. It's not even the direct prediction of the theory - the chart is at 2 arms lengths from the theory.

The theory is some pragmatic combination of the theories and observations of Hudson, Mayer, Warburton, Galbraith, Keen, Bernanke and others.

the FED and political actions are the direct prediction.

The chart is, again, twice removed from the theory.

Ka-Poom Theory, the theory behind the chart, predates Hudson, Keen, and Bernanke, by many years, while Warburton and Mayer were inputs, as were Garret Garrett and a hundred others.

The chart expresses likely changes in inflation and interest rates if the theory holds true. Note that the original chart from Nov. 1999 was wrong: we did not anticipate the securitized debt market and the various bubbles it spawned, and stated that on our About page when we re-opened in March 2006. The second chart is a phase shift of the first, published in April 2006. Barring the development of a new bubble, which seems highly unlikely, no further phase shifts will be needed and the chart stands as is.

The primary value of such a theory is to compare actual events against the model. The variances from the model are more instructive than the agreements.

[Spartacus]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Between managing the 100+ applicants to join iTulip every day and filtering out spammers, at this rate we're going to have to hire a full time troll chaser.

Get some slave labour (sometimes called "interns", and other times "grad students")

(speaking from personal knowledge, having been one)

[Spartacus]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

if I understand correctly the chart is NOT the theory. It's not even the direct prediction of the theory - the chart is at 2 arms lengths from the theory.

The theory is some pragmatic combination of the theories and observations of Hudson, Mayer, Warburton, Galbraith, Keen, Bernanke and others.

the FED and political actions are the direct prediction.

The chart is, again, twice removed from the theory.

[bart]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Between managing the 100+ applicants to join iTulip every day and filtering out spammers, at this rate we're going to have to hire a full time troll chaser.

Maybe you could start a volunteer official iTulip troll chaser group... :eek: :rolleyes: ;)

They sure are coming out of the woodwork, and its a sure indicator that iTulip's impact is growing greatly, and its approach, accuracy & relative sanity is getting the attention it deserves.
Fundamentals like a class act are always a winner.

[FRED]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

You're inaccurate, and also seem to like cherry picking... and are completely ignoring that the full SGS CPI peaked at around 13.6% in 2008.

If you don't care for Ka-Poom theory and apparently have so much attention on disproving it, why are you even here?

Between managing the 100+ applicants to join iTulip every day and filtering out spammers, at this rate we're going to have to hire a full time troll chaser.

[bart]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

And it's already inaccurate. Even using Shadowstats CPI, we never even got close to the 2008 peak CPI of 14% shown on this chart (Shadowstats gives 9%). Your timing is right, but the values are off.

You're inaccurate, and also seem to like cherry picking... and are completely ignoring that the full SGS CPI peaked at around 13.6% in 2008.

If you don't care for Ka-Poom theory and apparently have so much attention on disproving it, why are you even here?

[Chris Coles]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

If the system is predicting deflation and the reality becomes inflation then, as the change occurs and inflation starts they will be completely blindsided and will refuse to recognise the symptoms. Classic Mandarin mindset will overcome their perceptions. The more I have listened to the debate the more I have come to believe that regardless of what does happen, the system will be unable to respond. That it will lock up solid.

We often see this in a science fiction movie where the computer is asked an impossible question and because it tries to answer but cannot, it blows up. I suspect we are about to see the same effect, but this time for real. Faced with the unacceptable impossibility that they were after all wrong, they will not be able to change direction.

A good example has just turned up courtesy of Huffington Post

The widespread contrition permeating Davos is matched by an unnerving feeling of paralysis. The people here -- and we are talking about some of the most influential people on the planet -- seem confused, at a loss about how to attack the financial crisis. No one seems to think that the steps being taken are sufficient. It's as if we are watching things unravel -- how many times, for example, are we gong to hear that layoffs have exceeded expectations? -- but are powerless to stop the unraveling.

http://www.huffingtonpost.com/ariann..._b_162290.html

[Kurt Horner]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Note that the period of the "Ka" disinflation begins toward the end of 2008. Mind you, this chart was created in March 2006.

And it's already inaccurate. Even using Shadowstats CPI, we never even got close to the 2008 peak CPI of 14% shown on this chart (Shadowstats gives 9%). Your timing is right, but the values are off.

Note also that the period of disinflation lasts well into 2010.

Meaning that nothing short of obvious deflation will resolve this question before then, since the deflation types are predicting a similar time frame for the market bottom.

So, I guess the question is, at what point is Ka-Poom theory disproven? A generous benchmark would be if Shadowstats shows negative CPI for a six-month period then deflation becomes hard to dispute. (At present, they show 3.5% year-over-year but the rate is dropping like a stone.)

Ka-Poom Theory says a brief period of actual deflation is possible, as occurred in 2001 and is occurring now.

Is six months long enough to no longer be considered a "brief" deflation? Or should we use a peak deflation value (i.e. CPI below -5%)?

This is important, since if you wish to have a predictive theory, then the theory should also be falsifiable.

[FRED]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Although I'm in the iTulip camp with regard to Ka-Poom, there is another argument for hyperinflation that wasn't mentioned in the OP:

Rather than being completely driven by the creation of new money and credit, another scenario starts with overseas investors losing faith in the dollar. As a result, they look for a good way to exchange their dollar holdings for other assets. The largest supply of dollar-denominated assets is in the US, so the dollars come flooding home. When they arrive, asset prices are driven up, and the value of the dollar declines. At some point, the process becomes self-reinforcing: rising asset prices and a declining dollar encourages the selling of dollars and the purchase of assets; the velocity of money will increase.

What's different about this scenario is that the tools the Fed has available to it will do relatively little to slow it down, because it's not credit-driven.

That is correct. That is part of the process. Please see the now frequently copied Ka-Poom Theory circa 1999.

[Sharky]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Although I'm in the iTulip camp with regard to Ka-Poom, there is another argument for hyperinflation that wasn't mentioned in the OP:

Rather than being completely driven by the creation of new money and credit, another scenario starts with overseas investors losing faith in the dollar. As a result, they look for a good way to exchange their dollar holdings for other assets. The largest supply of dollar-denominated assets is in the US, so the dollars come flooding home. When they arrive, asset prices are driven up, and the value of the dollar declines. At some point, the process becomes self-reinforcing: rising asset prices and a declining dollar encourages the selling of dollars and the purchase of assets; the velocity of money will increase.

What's different about this scenario is that the tools the Fed has available to it will do relatively little to slow it down, because it's not credit-driven.

[Spartacus]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Your points are well taken. I don't claim that long term deflation is absolutely impossible, I don't think EJ does either. We do, however, have Bernanke's playbook.

At some point you just have to take a side. You could choose Mish's bombastic reasoning or EJ's less bombastic reasoning (apparently perceived by some as wishy-washy).

I've come down on the side I have because we have that playbook and are not tied an ideology saying
"the FED can do nothing",
"I'm an Austrian", or
"Rothard RUL3Z!!!, K3yn3s dr00lz!!! ".
(trying to be funny, not facetious)

My response is that someone with good credit may not take on more credit if they fear job loss . . . and no brakes on government only addresses the consumer credit availability side, not whether the credit offered will be used.

"no brakes on government" means several things
1. government can spend as much as it wants
2. they can set the stage to where there is no risk to banks writing loans
3. they can set the stage (maybe with new forms of insurance) to where there is little or no risk to people with good credit taking out loans.

Then fear don't enter into it.

If I understand correctly, spartacus also suggests that this type of deflationary scenario has "never happened since fiat money took over." My response would be to point out that in this country we have never had 20% unemployment and 40% of stores closing under a fiat money regime.

It's a good point and we don't know what will happen.
We only what Bernanke has promised to do try to fix the problem.

Fred's missing my point -- which I believe was clearly stated -- suggests to me that there is a lot of momentum in his/her(?) thinking process on this subject, and perhaps the deflationistas' 2nd position deserves a closer analysis.

Answering the same question 100 times and keeping gross photoshop'd porn off the site can be tiring, and may lead to reading something new with many of the same words as older posts as another one of those older posts.

[raja]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Sorry, raja. Still don't get your point. Are you saying that goods and commodity prices can't rise while demand is falling? Is that the deflationists' point that you say is "right"?

EJ said there are two components to the deflationistas' position, and that they are both wrong.

I'm saying that the second one may not be wrong.
EJ said, "Once past this first part of the deflationista's argument, the next is the "you take a horse to water but can't make him drink" argument, that the Fed can create all the money in the world but it can't make households and businesses spend it."

I'm suggesting that may be correct. People may not want to spend due to fear, as they see around them people losing jobs and stores closing. I saw a taste of this fear firsthand when my wife and her friend were shocked to find that three of the stores that had planned to shop in this past weekend had closed down.

The charts Fred posted in response to my initial post show past behavior, so I believe they do not negate my point, which refers to future behavior in respone to the deepening crisis.

spartacus did get my point . . . but he disagrees with it. His reasoning is: "even with mass unemployment, there still are lots of people with good credit. AND ... there seem to be no brakes on government."

My response is that someone with good credit may not take on more credit if they fear job loss . . . and no brakes on government only addresses the consumer credit availability side, not whether the credit offered will be used.

If I understand correctly, spartacus also suggests that this type of deflationary scenario has "never happened since fiat money took over." My response would be to point out that in this country we have never had 20% unemployment and 40% of stores closing under a fiat money regime.

Fred's missing my point -- which I believe was clearly stated -- suggests to me that there is a lot of momentum in his/her(?) thinking process on this subject, and perhaps the deflationistas' 2nd position deserves a closer analysis.

[zoog]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

One thing I learned pretty early on after I started reading iTulip was to broaden my time horizon considerably. Despite myth of the slow crash, the various stages of this economic upheaval can take a long time to play out. Or they can change rapidly, it's hard to know. The suddenness surprises people, but the slowness outlasts their attention span. Our entire culture, at least here in America, has trained us to focus on the here and now... 15-second commercials, half-hour tv shows, yesterday's news is old news and what happened today is a total surprise. Is the stock market up today, things are good. Is it down today, things are bad. It really takes a concerted effort and a strong will to look beyond the short term, and the medium term, and even what most of the financial press, analysts, and economists would consider long term, to see what is eventually coming. And then prepare yourself as best you can... and wait. And wait.

[we_are_toast]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Eat This! Deflationistas!

Buffalo's football team won't have a place in this year's Super Bowl hoopla, but don't worry, its chicken wings will.

Amid unnerving media reports that spread from here to New York City and even Seattle about a potential shortage of the Buffalo-born appetizer heading into the big game, authorities say yes, production is down and yes, prices are up.

"But there's plenty of wings," assured Richard Lobb, spokesman for the National Chicken Council in Washington.

For those scoring at home, that'll mean about 1 billion wings scarfed down over the Super Bowl weekend.

In the last week or so, some fretted that the spicy snack would be scarce for a number of reasons: the highest wholesale and retail prices in recent memory; an industrywide, economy-driven drop in production of 5 to 6 percent; a bankruptcy filing from major Texas producer Pilgrim's Pride (nyse: PPC - news - people ), though it remains in business; and a push to sell wings by restaurant chains like Pizza Hut and KFC. Taken together, connoisseurs worried that demand would outstrip supply.

And chicken wings were indeed missing for a day from the kitchen of one Niagara Falls restaurateur, but that was by design. Owner Sam Musolino refused to serve wings at Sammy's Pizzeria Monday to protest the annual price increases that arrive every year just in time for the big football weekend.

"They're basically just taking advantage of the pizzerias," said Musolino, who said he was paying $46 per 40-pound box of wings before the price jumped to $78 for the same case.

Lobb said the price is up because feed prices have gone through the roof and chicken producers have had to cut production as consumers have cut spending at casual dining restaurants that favor chicken dishes. That slump recently led to a glut of chicken on the market.

Now that supply is smaller and prices are up, Musolino said he can't pass along the temporary spike to customers - not that they'd pay anyway. "Everyone's so tapped out these days, there's no way you can raise the prices."

It's no trivial thing in this city that gave the world Buffalo wings. Anchor Bar owner Teressa Bellissimo first deep fried the wings and dunked them in hot sauce on a Friday night in 1964 when her son Dominic's hungry friends dropped in while he was tending bar. Until then, the wings were usually used for the stock pot.

Wholesale prices for fresh wings are up to $1.51 a pound this week, compared to $1.24 last year. But as of Jan. 1, the poultry industry had 38.3 million pounds of chicken wings on hand, down slightly from about 40 million pounds a year earlier, according to the U.S. Department of Agriculture.

"It's America's number one appetizer," said Drew Cerza, founder of Buffalo's annual chicken wing festival, who, incidentally, won't be frying up any wings on Sunday.

"It's my day off," he said.

http://www.forbes.com/feeds/ap/2009/...ap5983788.html
;)

[bart]

Re: Deflationistas, inflationistas, and hyperinflationistas - Eric Janszen

Loss of dollar hegemony does not benefit the elite...

Mere assertion.

CPI has turned negative...

Only if you believe both that CPI is 100% correct and not understated/manipulated, and that you do not distinguish between goods and asset inflation.