Deflation Is Crushing QE Right Now http://seekingalpha.com/article/1855341-deflation-is-crushing-qe-right-now " Investors are focused on the possible tapering of U.S. stimulus and starting to take some money off the table after a strong equities rally year-to-date. Less attention is being paid to the biggest source of risk at present: deflation in the developed world. All of the past week's data point to heightened deflationary risks. Paltry U.S. consumer price index (CPI) figures, German producer prices undershooting and another bout of weakness in commodity prices, particularly oil, suggest deflation is winning the battle over central bank stimulus. Which is something that Asia Confidential has been forecasting for some time. It's no coincidence that at the same time, the Japanese yen has reached four month lows versus the U.S. dollar. Japan is printing an enormous amount of money in a bid to end its 20-year affair with deflation. It wants inflation at all costs and the yen is collateral damage. Lowering the yen increases the competitiveness of Japanese exporters, resulting in more cars, robots and flat-panel TVs being shipped abroad. And that means Japan is exporting deflation, and resultant lower prices in these goods, to the rest of the world. Key competitors in China and South Korea are starting to fight back but are being hampered by their strong currencies versus the yen. There's increasing talk that Europe will resort to more stimulus soon to wade off deflation. The euro has been remarkably strong compared to other currencies, making the region's exporters increasingly un-competitive. Across the Atlantic, Bernanke and co. have been further hinting at QE tapering, but with rising deflation risks, any tapering seems unlikely. If Japan succeeds in weakening the yen further, you can be sure that other countries will start to complain and print money to lower their own currencies. The phrase "currency wars" may come back in vogue soon enough. What does all this mean for markets? Well, it increases the odds of a further stock market correction before year-end. And a bond rally would seem overdue. But more broadly, it means the tussle between deflation and central bank stimulus should continue. That means more money printing and low interest rates for the foreseeable future. Which could push asset prices higher from already elevated levels, raising the odds of a major correction down the track. Disinflation reigns I've spoken of deflation so far, but it's really disinflation (falling inflation) that's occurring. A host of recent data suggests that this remains the primary threat to global economies, including: 1) The U.S. inflation rate fell to 1% annualised in October, the lowest figure in almost 50 years, excluding the 2008 financial crisis. Inflation in America peaked in 2011 and remains way below the Fed's 2% target rate. The chart below is courtesy of Business Insider. ... "
What you said is absolutely true. Deflation is also a threat in the recent times for US. Declining jobs, low output and economy fall dragging them down everyday.
why deflation is so bad? you can buy more s**t with your money,rather than see your buying power disappear because of Bernarke and Co
It isn't. Should be a natural correction to imbalances. Except... makes politicians look bad come election time. Inflation destroys nearly everything over time. People... and especially politicos... don't get it. Never have, never will.
That's only true if you have savings. If you can believe what you read these days, most Americans are one pay check away from a homeless camp.
how come only you get it and no one else does? i have heard statements like that on many tv depicting what crazy people say. anyone with half a brain knows deflation is far worse than inflation. deflation destroys the incentive to innovate , work, wealth create etc. please do not gloss over those points.
I remember the inflationary environment in the 80's. To keep employees from jumping ship for higher pay, my employer was doing "compression" raises i.e. non-merit pay increases to keep up with inflation. I'm not sure what would happen in a deflationary environment. (Actually I think economists call it "disinflation" instead of "deflation" for some reason)
sounds like another boogeyman with usual motto-we gotta fight! i mean-i understand that it affects the economy(as been pointed out-natural adjustment),but me as a trader? f** no. and like i said-i see it as a positive thing for MY money. cause it is appears to me that every possible asset is overpriced now and savers have no place to go with cash. are we all should invest into a stock market after 30% run up in ONE YEAR(based on...well...nothing,but QE..)? another sign- http://www.bloomberg.com/news/2013-11-22/canadian-inflation-slows-more-than-forecast-to-0-7-.html ----Bank of Canada Governor Stephen Poloz told lawmakers two days ago that inflation has been lower than he would like it to be, and reiterated that the economy needs the âsubstantialâ stimulus of a 1 percent policy interest rate.--- why their economy need 'substantial' stimulus? how to f** are you going to stimulate canadian economy that mostly exports natural resources? and population a size of NY common..BS BS and more BS from politicians to create an appearance of hard work FOR PEOPLE and US Fed is in constant fight,keeping themselves busy..fight with inflation,now fight with deflation..boy oh boy..how about leave the s**t alone and see,what happens?
http://en.wikipedia.org/wiki/Disinflation " One of the most important constituents of successful disinflation is the credibility of monetary policy according to Thomas J. Sargent. It states that the beliefs of wage setters are affected if they feel that the central bank are religiously committed in reducing the rate of inflation. The way the wage-setters formed their expectations can only be changed with the help of credibility. The credibility view is that fast disinflation is likely to be more credible than slow disinflation. Credibility decreases the unemployment cost of disinflation. Therefore, the central bank should go for fast disinflation. "