While John Maudlin is best at promoting... John Maudlin, I have read A Gary Shilling's books with some interest as he is one of the few writers that understands deflation. Gary's long term take on the long bond yield at 3% is tough to stomach, but good reading, if for nothing else but 'just in case'. I do think that he adapts his world view to fit his long term target yield there, however. My technicals suggest that we are in a potential pivot zone for that long bond yield, and statistically, I think there is much more upside than downside (not that Gary couldn't be right). But, if you go and read the (rather long) bond thread in futures, you will also come to the conclusion that we are very much at a wait-and-see point in yields - once long bond yields drop convincingly below 4.40% I may have to join his camp (and lose my structural short in the 30 year from very opportune levels). So, when you read the article, those graphs are of interest, but take it with a grain of salt and know where the writer is coming from. And last I checked, while I certainly agree with the likelihood of lowering the fed fund rates again in the future, bad debt=increasing likelihood of losing your shirt while making a loan = tighter credit = higher rates charged on loans due to higher implied losses = higher long term rates, so in that respect I disagree with A. Gary. You're tooo much of a permabear. You may be implicitly right, but I think you need to read more.
Dr. Steph Excellent Commentary........ You make an excellent and highly overlooked point.. For those that have the money...they will demand more interest with respect to the higher inherent risks... One would notice this particularly if you monitor the banks in high risk credit countries...The interest rates are higher than lower credit risk countries... However what is interesting is the deflation question.... This means that everthing shifts down...including the higher credit risks... Big ticket items such as housing shifting down...and replacement costs due to Chinese pricing versus the prior USproduct costing....make for an interesting deflationary period with regards to credit risks and debt pricing......
Watch out for rampant commodity market manipulation. What do you do when global growth is slowing, the U.S. housing market is slowing, there is growing uncertainty about the ongoing strength of financial markets, and interest rates are barely keeping up with inflation? Manipulate the price of life's necessities.
Sure. Creating an environment in which institutions are bidding up the price of a material or product when there would be no supply/demand imbalance at lower prices.
To be perfectly honest, I was thinking of wheat, corn and some other crops. I know that there have been claims of crop loss due to drought, but from the (admittedly limited) data I've seen, any drought this summer was very specific to only certain regions - so that some regions did get hot, while other regions had bumper crops. This is especially true of wheat. I also think that while oil has dropped significantly, its price is not supported by supply-demand fundamentals. But I am sure I could be convinced otherwise by someone who knows these specific commodities better than I do... ..if I have the supply-demand equation wrong, and equilibrium has really been achieved. But you're right, few commodities haven't run up - I'm just wondering how much higher they can be pushed.
So much new money (hf's) have entered markets that they never thought they would ever touch is creating crazy price swings. The grain markets are tiny.