NEW YORK (Reuters) - The U.S. economy is in for a "lasting slowdown" and could face a Japan-style period of relatively low growth coupled with high inflation, billionaire investor George Soros said on Monday. Interview: http://www.reuters.com/news/video?videoId=101624&newsChannel=newsOne Full article: http://www.reuters.com/article/newsOne/idUSTRE53537D20090406
We will have mega deflation in an environment of anemic or negative growth. Inflation will not happen no matter how delusional certain commodity bulls become or want it to happen.
Soros says there will be high inflation and Buylowsellhigh writes of deflation. Now what's it going to be? Looks like next we probably see prices coming down = deflation, when do we get inflation? Seems like contradiction! Or one after the other and what are the signs to look out for? Felix
Don't forget there are two possible components to inflation. Actual demand for goods and money velocity are one component, and that's not going to be a concern for a while I think. The other component is what the other guys in the world think of your currency, and that's the wildcard here. How long will people demand the US dollar? Unfortunately, it doesn't seem like anyone knows the answer to that, we're all just guessing. However, it would make prices go up since most of the things we use/eat/wear, etc, are also bought by the rest of the world. At least that's how I see it after thinking about it for a while. That's why we're having these never-ending arguments about it. First of all, we're not all thinking about the same causes for deflation/inflation, second of all, we can only guess about the world's demands for dollars, and who even knows how manipulated that market is. Now, housing, eh, who knows. I don't see that going up even when other stuff starts going up.
Let's not forget that low velocity can be offset by increasing the money supply, which is what's happening. There has been real demand destruction, so we know that demand-pull probably won't be the spark that lights the fire. Growth in the monetary base+future increase in V = rise in costs = cost-push inflation. Just need to see velocity pick up, coupled with modest credit growth and ...Bada-Bing! Could be a couple years away though.
The ruling party is overstimulating most likely, people tend to not want to underdo something so they overdo it and screw things up. It's better to have to explain screwups that you overdo, you can say "my passion just overrode reason" or some bullshit like that.. I think Soros is the expert here, he backed Obama and did everything he could to get him in office, he sure would have the inside track to what's going on and he's smart enough to understand it all maybe... The stimulus is a joke anyhow, it's not doing much to unfreeze credit with regard to the toxic assets... that's all they had to do is to soak up the toxic assets or make them transparent so the organizations that had them could fail and get bought up by competent people. So the goal is not to fix the economy, the goal is consolidation of political power in the hands of the ruling party and George Soros...
Precisely. From G20 Soros said the leaders are "ahead of the curve"... Which is ludicrous... And here he paints a gloomy scenario. Ignore what Obama and friends say... But watch what they do.