If people were expecting inflation, why are they selling off their stocks and buying bonds, bonds that would benefit handsomely from deflation?
My take on the masses: they want money. That's all they want. They are tired of not having money. If they get it, they will hang on to it. They will not spend it. That's deflationary. What they expect is of secondary importance.
Actually, there is a book out there that proves the opposite, that masses can be quite right in the long run.... http://www.amazon.com/Wisdom-Crowds-Collective-Economies-Societies/dp/0385503865 The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations So, what were you saying?
I haven't read the book, but it has a few very intriguing examples of mass decissions: "On the day of the Challenger disaster in 1986, the stocks of many NASA parts suppliers dipped. Within a few hours, all recovered, except for the stock of Morton Thiokol, the manufacturer of the O-rings linked many weeks later to the explosion. But how did stockholders "know" that Thiokol was culpable? Surowiecki explains how the individual decisions of many stock holders combined--with some cancelling out and others reinforcing each other--until a result emerged that no single stockholder could have predicted." Also: "In 1906, Francis Galton, known for his work on statistics and heredity, came across a weight-judging contest at the West of England Fat Stock and Poultry Exhibition. This encounter was to challenge the foundations of his life's study. An ox was on display and for six-pence fair-goers could buy a stamped and numbered ticket, fill in their names and their guesses of the animal's weight after it had been slaughtered and dressed. The best guess received a prize. Eight hundred people tried their luck. They were diverse. Many had no knowledge of livestock; others were butchers and farmers. In Galton's mind this was a perfect analogy for democracy. He wanted to prove the average voter was capable of very little. Yet to his surprise, when he averaged the guesses, the total came to 1197 pounds. After the ox had been slaughtered, it weighted 1198." Betting agencies are also very good predictors: "a great example of this in the Australian election before the last one. The polls, both nationwide and in marginal electorates, repeatedly predicted a knife-edge result, with the lead changing often from pollster to pollster and from poll to poll. But throughout the campaign the betting agency Centrebet (in response to bets placed) had the (incumbent) government coalition parties firm favourites. Close to polling day the Prime Minister was $1.16 for a win (for a $1 bet) while the Opposition Leader was $4.60 for a win. The gamblers continuously predicted a landslide to the government coalition, and so it was. The polls were wrong. The crowds had the wisdom."
I always tell myself this: My grandfather payed 0,05 cents to take a bus. Today I pay 5000 times more. Will this trend reverse? My currency got converted to the Euro 10 years ago and a botle of Coke went up 400%, a ticket to the movies 100%... The thing is how to cash in on these longer trend moves... Buying a truck of coke bottles and store them to sell in 20 years wont get you anywhere...