Adios Inflation Expectations

[Kurt_and_Hunter]

CPI expectations (as derived from zero-coupon 5-year inflation swap)



http://krugman.blogs.nytimes.com/2010/08/26/anchors-away/

[xchrom]

1. Recommend

[Warpy]

2. Gee, whiz, what a surprise.

Only a total fool or somebody with a lot of gold to get rid of quickly would say inflation is going to be a problem during the near future. This is a purely deflationary economy, people thrown out of work unable to demand goods and services, throwing other people out of work and retailers and service industries having to cut their prices to unload what they have left.

Having money isn't going to be that much of an advantage since there will be few places to buy anything new, we're all going to be swapping the last few bucks around with each other as we sell things to pay the rent and put some food on the table.

That doesn't mean that offshore producers won't raise their prices. It means they are losing their largest market, thanks in part to their success at getting corporations to help them loot industry from the US, leaving workers beggared.

[Subdivisions]

3. Hey Warpy, if Ben turns the presses back on for QEII, could that

lead to inflation or would deflation continue to overcome it? Also, where is the bottom of the spiral and what happens at that point?

[Warpy]

4. The bottom of the spiral is feudalism

and I don't see that happening in a technological society.

The only thing that has stopped it from happening before is massive government intervention.

[Subdivisions]

7. What about the QEII question? n/t

[snot]

10. We're already feudal: serfs attached to the real property owned by our overlords;

unable to migrate without permission, bound to fight in their wars and hope for their charity in exchange for our obedience.

[villager]

13. +1

n/t

[Kurt_and_Hunter]

14. Or like workers owing the company store

Can't quit... no jobs. Can't move... your house is underwater.

[Kurt_and_Hunter]

9. the Fed has a hard time getting the money into the economy

They can open the spigot to infinity but the only way create money is through lending and that requires a willing borrower.

And with no inflation and a tragic economy even our current record-low interest rates are way too high.

The only way to get the real borrowing rate down is to get inflation up, but to do that we have to get people to borrow all this imaginary money that needs to be borrowed to become real.

Chicken vs. Egg.

Thus Japan was unable to create any inflation during a 7 year period when Japan more than doubled its monetary base. Price declines every year. Monetary base doubled. Amazing but true.

Only the government is in a position to make the money real by borrowing it and then giving it to somebody.

But of course it won't... politically impossible, etc., etc.

[mistertrickster]

11. My broker wanted me to buy leveraged shorts betting inflation would go up.

I said "no way."

As soon as my portfolio goes back up to where it was, I'm cashing out and moving to a different broker, heh.

[Warpy]

12. I've actually found a good broker

meaning he's not any sleazier than he has to be to keep his job. Since I correctly predicted the crash in the fall of 2007 and told him to get me out of financial stocks for the duration, he knows better than to try to sell me gold or any other nonsense. Oh, and he's a Democrat.

I imagine he unloads the gold certificates on his Republican clients. They probably clamor for them.

You can swap brokers without cashing out, by the way.

[mistertrickster]

15. Good point about switching brokers without cashing out. If you get any more vibes on an impending

crash, let me know . . .

[Art_from_Ark]

16. Inflation is already a problem for a lot of people

It depends on what you have to spend your money on. I know quite a few people on fixed incomes (and that includes people who are working but not receiving any raises) who are finding that their money doesn't go as far as it used to.

Food prices-- going up
Utilities-- going up
College tuition-- going up
Home/automobile services-- going up
Insurance-- going up
Medical services-- going up
And many types of taxes are also going up

Only a total fool would say that there is no inflation.

[Progrimm]

5. Oh noes! What will the Paulites say now.

[TheKentuckian]

6. Yeah, there isn't enough escape velocity to get out of the black hole to create inflation

I don't know what people see at all. At some point economics went from an artful science or a scientific art to a religious cult mouthing dogma for most of the field.

[unblock]

8. economics didn't change, it just got replaced in the media with political economics.

every economist you see or read in the msm has an agenda. even the good ones.