What "Deflationary forces"? Could you please elaborate where the forces are coming from? Average americans haven't felt the full brunt of the USD devaluation because of several key factors. 1) The USD is pegged to crude. Therefore every oil consuming nation is importing US inflation along with the crude they consume. 2) Major exporting nations peg their currencies to the USD. Thereby importing lower purchasing power for their population. USD might be losing value, however they'll try to keep making those Nike shoes for 5 Yuan each. Those are the main primary reasons. If you read the outside media, you find the middle class in many nations is slowly moving into poverty. The economic gap between the elite and the masses is reverting back to the economies of the middle ages. Add to the above the commodity price spikes because of the free money given to the international bankers. You and I can't walk in and borrow a few Billion at near Zero interest rates. However the International bankers can and are putting the money into commodities.
Yep, and at some point the public is going to figure it out and the world is going to have a domestic disturbance it hasnt seen a in a long time
Yes, Landis Please explain why oil spiked from 68 when Fed cut - exactly that moment? why it spiked again on september 19? why it spiked today when we got 7% inflation numbers and Fed governors said inflation is contained? Did China decided to buy exactly at those moments?
Well there are food and wage related riots every day in many developing countries. http://www.luxist.com/2006/03/22/big-trouble-at-the-burj-dubai/ We don't read about them in the regular western media outlets. god forbid the american should miss one days news of the dysfunctional life of their favorite drug addled american manufactured teen celebrity. These nations are getting hit double sided. The citizens don't earn enough to compensate for the outrageous speculation in the commodities markets. Add to the above, higher food prices and transportation costs and degraded buying power and there can be only one result. Is it any wonder that all the worlds governments have been busy implementing draconian police powers for their citizens?
The DEFLATIONARY "forces" that are inherent in the current banking system. Do you not have any clue as to how all sorts of paper is being DEVALUED? Just because interest rates have been lowered by the FED, does not automatically mean that Banks will go out lending money and helping to increase economic growth/expansion. I am amazed that no one can see this. Didn't anyone on ET take Econ. 1?
Quote from Landis82: You really don't get it do you? There are tremendous DEFLATIONARY forces going on in the banking system. The FED cannot avoid those DEFLATIONARY forces, otherwise there will be a "Depresssion" that makes the 1929-1932 period look like a cakewalk. And yet you claim that this is about"fixing every little damn problem in the financial markets." You obviously have a total lack of understanding regarding the MAGNITUDE of this issue. Go figure. -------------------------------------------------------------------------------- I would not disagree with Landis either. He is just making a blanket statement that the whole economy is heading for major deflation. In my view he is half right half wrong. Yes the financial sector is going up in flames and as a result most house prices are getting crushed....people going broke blah blah blah. This is just one side of the equation though Landis. On the other side you have very strong worldwide growth which is fuelling commodities higher and higher along with all sorts of other problems thrown into the mix creating very volatile prices and even dangerous supply and demand situations in some areas. You also have the American dollar which has crapped out and oil is priced in USD as is gold etc. The more the USD gets deflated the more commodities rise in price. So in the end we have one big cluster f$(@ with prices pulling hard at one end of the economy and prices pulling hard the other way at the other end. How far the deflation side of this goes with house prices, banking, and consumers is anyones guess but eventually the lag effect of the FED cuts will take effect later in the year and you can bet that a new bubble will be born. Who knows where it will end up?
Yet another poster that cannot tell me why Fed Funds are still trading at such a "high" rate relative to the yield on the 2-year Treasury Note.
Right now, it is the ONLY side of the equation for the simple fact of the MAGNITUDE of what is occurring with the incredible DEFLATIONARY forces that are currently inherent in the U.S. commercial banking system. Many of the posters here on this thread seem to simply "write-off" and discount what the banking sector means to our Economy. They equate banks with residential lending ( mortgages ) and the housing market and that is about it. People going broke, having their homes foreclosed on, tons of equity evaporating into thin air because people committed fraud and banks being subjected to HUGE write-downs the likes and MAGNITUDE know one has ever witnessed before. In other words, "It's the ECONOMY stupid!" The U.S. commercial banking system is what makes our Economy run. Period. Inflation doesn't mean a damn thing if JP Morgan, Citicorp, Bank of America, and a whole host of other large money-center banks are illiquid and dysfunctional. Their will be no Economy here in the U.S. if that happens, AND it will drag down our trading partners as well. Yet, posters on this thread continue to discount the severity and magnitude of what is going on currently in the US banking system. And they keep pounding the table about inflation while paper assets are DEFLATING left and right and banks are unwilling to loan money. Go figure.
I knew that it was only a matter of time when your Ego felt the need to resort to personal "attacks". Very typical. Again, you might actually lend some support to your claim about the FED having the "spigot" FULL ON if you were to provide some charts of the Money Supply. But leave it to you to give me a lesson on reading comprehension and grammar in order to make your case. I guess you've never heard of "Don't watch what the Fed says . . . Watch what they do." If anything, a lot of people believe that the FED has been very "late" in easing monetary policy because they have been so "sensitive" to inflationary forces. Otherwise, why would the Fed Funds Rate ( just prior to Martin Luther King Day cut of 3/4 of a point ) be 2 FULL POINTS above the yield on the 2-year TNote? It's really a pretty simple concept. But you continue to avoid answering my question. But I guess you believe that your credibility is confirmed just by re-stating the same claims over and over again, without any substantive facts or supporting evidence. Typical.