ET members can't agree on whether we will see inflation or deflation in the coming years. You would think that it's easy to guess if there will be inflation or deflation and only guessing the rate would be difficult, but that doesn't seem to be the case, media says deflation deflation deflation In my opinion inflation inflation and even more inflation, regardless of house prices falling or not. I don't get where most people get the idea that job losses will amount to deflation, it's not necessarily true, actually in most cases through out history it has been the opposite. Bad economic conditions will usually cause inflation, not only because and not only if the gov or central bank starts printing more money, but also because most businesses will not be able to operate under the hard economic conditions and will fail, leaving a smaller number of businesses that offer the services or products they used to offer, this spells monopoly and monopoly means the owner of the monopoly controls prices. Another condition that can cause inflation in a specific currency (say in USDs) is when people do less and less business in that currency, such cases start to appear under bad economic conditions. Anyhow in my opinion even if there is deflation right now, we will see double digit inflation rates by the end of 2010 plus don't forget that the inflation rate is at about 6% right now that means in say 7 years (1.06)^7=1.5036 that means the price of things will go up by about 50% in just 7 years now if we see inflation rates of about 17% for 7 years (1.17)^7=3.0012 the price of products and services will go up by about 300% in that time frame
Biflation is the state of an economy where the processes of inflation and deflation occur simultaneously. During this period there is a rise in the purchasing prices of commodity items and a fall in the purchasing prices of non-commodity items. The purchasing price of an item is based on the demand for it and the amount of money in circulation to pay for it. Biflation is preceded by an overabundance of money placed in circulation within the population by a central bank. Since commodities (such as food, energy,clothing) are essential and are in high demand, the purchase price for them rises due to the increased money available to buy them. This increasing purchase amount is Price Inflation. One reason is liquidity flees to the safest and most liquid assets. This causes the money supply at upper levels of the pyramid to shrink while the money supply at lower levels of the pyramid expands. This causes deflation as the money supply evaporates away. Likewise, Biflation is preceded by a decrease in employment within the population. Although there is an increase of money in circulation, fewer people have access to the money to make purchases. As a result, a greater percentage of individual wages is directed toward purchasing commodities and less is utilized for purchasing non-commodity items. Since debt-based assets (such as automobiles, televisions, stocks) are less essential and are in lower demand, the purchase price for them falls due to the decreased money available to buy them. This decreased purchase amount is Price Deflation. http://en.wikipedia.org/wiki/Biflation
There are both strong inflationary and deflationary forces operating right now. We saw LOTS of inflation over 2002-2007... though the Powers continually LIED about its magnitude. Currently we're seeing deflation, but all of this money pump will likely lead to very high inflation at some point. Nobody knows which will ultimately prevail.
allaboutmoney you have given the same analysis that i gave a couple of days ago. if you read my responses on the link below. also i note that it is as much how you see inflation. http://www.elitetrader.com/vb/showthread.php?s=&postid=2290435#post2290435 i found that binflation interesting. this is correct, it just goes to show how uniformed the media is they have never commented on this even though the summation is accurate.
what are the numbers for the amount of money created and money destroyed i think it would be hard to say, maybe the fed knows
Nope. An expanding monetary base does not necessarily mean inflation. The Japanese banks simply didn't lend out enough to cash to the public, they just sat on it.