The only way to prevent deflation is to keep pumping up the debt bubble. If it works then deflation will only be worse the next time it pops. If Greenbubble had simply let the market forces work before it wouldn't be a problem. Now we are looking at the end result of multiple bubbles that have never popped. The total bubble just kept getting bigger.
Deflation is good. Considering you still have money. The economy had huge growth. Yet some people are remaining bullish while others bearish!!
Until money "printing" exceeds credit contraction, which it does not, there will be deflation. Money printing does not do any good, if who it is distributed to consume it in their black hole of losses. Like say the banks, or the mae's, or car company's, or even idividuals. So if everyone is putting the "printed money" on debt, to pay if off, or cover losses, the net money supply does not increase. Japan didn't want deflation either.
RickB wrote... Until money "printing" exceeds credit contraction, which it does not, there will be deflation. Money printing does not do any good, if who it is distributed to consume it in their black hole of losses. Like say the banks, or the mae's, or car company's, or even idividuals. So if everyone is putting the "printed money" on debt, to pay if off, or cover losses, the net money supply does not increase. Japan didn't want deflation either .................................................................................... Certainly Bernanke and crew run such offsetting theoretical models......and is making his best personal effort to offset the credit contraction with the press..... However other such entries such as shipping out $700 billion for energy.....which is really trillions when levered.....must be included..... Surely Bernanke has looked at the total picture in some way.... However, it is difficult to build a car with a pair of pliers..... He has two main tools......printing money and interest rates.....which can negate each other...... ..................................................................................... One should suspect his using both......but reducing the money supply and increasing rates enhance currency valuation......and the FED is anything but independent of the government and its supporting tax base......
I concur that the charts (and the fundamentals) point to near-medium term deflation (probably for the next couple of years). Of course, long-term every currency in history has been inflated to nothingness. Every chart is pointing toward delation right now. Landis82, I'm one of the few people on ET who agreed with your prior posts on FED policy (although I'm more of a lurker and not a prolific poster). Most of the armchair idiots on ET don't understand how a francional-reserve banking system works or the money multiplier. The overall contraction of credit is overwhelming any "money printing" right now. Having an economics degree helps I suppose. I would go with the trend and buy long dated eurodollars and T-bonds right now. Gold and silver will certainly do well longer term, but they are going to sleep for a little while...
Original poster here. I've not the same IP as the person that posted under me. I agree that we'll probably see inflation again, just so the government can pay off it's debt. That will fuel another bull market in some asset class or another. We'll just have to keep a look out.
You mean like the market forces (panic, bank runs, etc.) did their work during the Great Depression? Oh yea that worked out fine!
Fed/government is what caused the Great Depression. Not market forces. And once in it, government forces prolonged it. If Fed did not drop rates artificially low, and push people into loans, then most people would not have gotten into so much debt. Government interference with market forces is what causes problems. You can't mess with nature in the long term.
Allowing the cancer to fester will only make the matters worse. Although it might be painful in the short run, it would prove more life-saving in the long run to just rip the body open and remove the damn thing once and for all.