I can see the arguments for both inflation and deflation. I tend to favor the inflation crowd but it may take a year or more to become a problem. I don't see the economy slipping back into a steep decline because Americans are innovative enough to have adjusted to the current/past crisis. But, if Obama gets healthcare or cap & tax passed or any other massive bill requiring megataxes all bets are off on the economy. Normally real estate leads us out of recessions. I don't think that will happen this time because the baby boomer demographics (moving to smaller homes then assisted care), which was supposed to begin kicking in in the 1990's, is going to keep housing depressed or at least limited.
Your comment is pure sour grapes. Truly pathetic. You assume that Dr. Faber never makes bad calls and tells the world that he never makes bad calls. Everyone makes bad calls- including him. More importantly, I would wager a grip that he makes more good calls than you, and has the personal track record to prove it. And considering how often he makes calls, I would bet that he would kick your ass in a 'market call' contest...
I disagree with you/Adam there, pi. That's precisely the point that AI makes... Specifically, with an impaired credit channel asset price price inflation does NOT translate into CPI. I completely agree with the logic as applied to the bubble years, where credit was too readily available and households could easily 'monetize' inflated assets. The Fed totally missed/ignored it by using the OER measure as a CPI component, so Adam's criticism is completely on target. However, we're in a different world now (or should be).
The USA is still the largest manufacturer, producing almost twice as the next one - China - in total dollar value.
Asset price inflation will inevitably trickle into consumer markets. And if only a small portion of it does (because it's being countered by deflationary forces), this is arguably WORSE because it means "main street" has lost jobs and purchasing power whereas capital-owners have boosted their REAL wealth (due to the printing press and not "hard work" -- technically due to failing in the free market). Often times, we economists attempt to rationalize silly policies like printing money with a range of theories. These theories have merit at the proximate level. Proximate being the key word. On a macro / systemic level, these types of policies will likely only aggravate matters and inequity. You can't just print money (or increase the M2/M3/whatever supply) and think that it will improve the real conditions of the average (but especially lower class) American. Never mind the foreign nations which credit the US which are obviously big losers every time a dollar is printed regardless of whether inflation occurs or not. Again, this is a proximate "win" for the US, but as we have seen, the foreign credit will rapidly dry up with these policies and/or the US dollar will lose its status as a reserve currency (China is already spending more on commodities and entering into bilateral trade agreements with other nations WITHOUT the dollar). Call it the butterfly effect.
Maybe it's more a matter of semantics... "Production" in the USA is counted with an average wage component of what, $20/hr or so? Production in China is counted with an average wage component of $1-$3/hour? Could it be that China is outproducing the USA in UNITS? I don't know the answer... just a thought...
Units are virtually irrelevant. Dollar value represents the willingness to pay of the market for a given commodity and is the most important figure. If I produce 1 tv and you produce 1000 crappy t-shirts, I win. Of course, (long-term) profitability is probably an even more important issue than overall revenues...
I just had an email exchange with Rosenberg and he didnt seem so dogmatic in the `deflation no matter what` he actually accepts that inflation might emerge with a commited government http://www.elitetrader.com/vb/showthread.php?s=&postid=2471643#post2471643
You should tell him that there are adverse consequences to printing money regardless of whether or not there is inflation in consumer goods markets.