Stagflation, are you ready for it?

Discussion in 'Economics' started by Galatia, Sep 13, 2007.

  1. Galatia

    Galatia

    Cutting fed rates and causing inflation is just same as what Nixon did when he let the dollar to fluctuate against gold. This had hurt Europeans, now it's time for Japan, China and Russia (or orther dollar holders)

    I think that current situation is just same with the 1970's stagflation era. Despite current weak economy status, all commodity prices are going up day by day. USA is definately heading towards a stagflation era. Which is just the begining of a global monetary system crisis.

    World needs a new Bretton-Wood conference to set up a new monetary system which is based upon sth but not $ or any other fiat money.
     
  2. We may have already been in stagflation for a couple of years, and hardly anyone recognizes it. See how clever they are?
     
  3. I'd agree. Inflation is under-reported and growth is over-reported, IMO.
     
  4. From 2003, Greenspan Warns of "Painful Adjustments" When Boomers Retire

    Testifying before the Senate Special Committee on Aging, Greenspan suggested that Congress modify the Consumer Price Index to slow the annual cost-of-living increase in Social Security benefits....

    Adjusting the CPI would also increase tax revenues, since the InternalRevenues Service uses the index to index tax brackets to adjust for inflation.

    --------

    If you think the CPI is rigged to underreport inflation now, wait 'til the boomers really start hitting retirement.
     
  5. under reported inflation allows the Gov. to over report GDP since the y/y deflator is smaller,

    I would guess a 4% GDP is actually 1-2% GDP

    but that the hell,,,,anything coming from DC is bullshit anyway
     
  6. One of the reasons I became interested in trading as opposed to mid to long term investing is that it allows me to make money in more varied market conditions. I would welcome a period of stagflation like we had in the seventies. Trading a bullmarket in commodities while investing some of the profits in discounted value stocks sound like good market conditions to me.
     
  7. zdreg

    zdreg

    good attitude. people either see the glass as half full or half empty.
     
  8. Galatia

    Galatia

    Well, 3 months passed since my first post and both recession and inflation problem deepened.

     
  9. Excellent Commentary All.................

    ...........................................................................

    Massive and sudden drops in valuations...lend themselves to deflation...

    And yet dollar devaluation lends itself to inflation in commodity prices....at least for a while...

    Until ...a lack of demand plays its hand in the somewhat inelastic products...

    Very tough balancing act indeed...and not at all unexpected...
    .............................................................................
    Just rememember the simple real estate valuation model...

    ie there are 100 condominiums in a building...two years ago three sold for $100,000....One year ago...two sold for $200,000....and today one sold for $$50,000...

    The value has dropped from $20,000,000 to $5,000,000 in one year...

    Now when you take into account the derivatives and their implied leverage....the loss is multiplied and systemic...

    However...hard assets at some price...will sell...
     
  10. Ah yes...
    Fighting the last war.
    More and more, given what's going on now, which is mere hors d'oeuvre for the main course, I'm thinking deflationary spiral a la the Thirties, rather than inflationary spiral a la the Seventies.
    We're at the far limits of credit expansion this time, as we were at the end of the Twenties. At the end of the Seventies, we were at the end of resource utilization.
    Capitalism adjusts demands in one of two ways, either via price or via shortage. (If you see long lines, like at Soviet stores or American gas stations in the Seventies, you're regulating by shortage. If you see homeless folks in parks in tents, as you did in the Twenties, and as you do on a small scale in most major American cities today, you're regulating by price.)
    In the Twenties, it was by price, because the free market was mostly in place at that time.
    In the Seventies, it was by shortage, because regulation had pushed prices down to below where they needed to be to adjust resource utilization properly.
    This time, we're closer to the Twenties, as we are still in a post-Reagan, post-Thatcher world, where markets matter more than government. So, once again, demand will be adjusted by price, and that means deflation via withdrawal of credit, as happened in the Thirties.
     
    #10     Dec 13, 2007