No, that wasn't a typo.. I've been hearing/reading a lot of deflationary talk (particularly from bearish commentators) of late. There were comments from puntits on todays' final ever episode of ABC TV's "Inside Business" about declining commodity prices and declining consumer goods prices and then I stumbled upon this article on Zero Hedge from Russell Npier's comments. http://www.zerohedge.com/news/2013-11-30/russell-napier-we-are-eve-deflationary-shock
Oh wow. My friend was just pointing out how we are should be facing a deflationary phase, based on his personal tracking of prices of goods and commodities.
Although I haven't properly scrutinised what happened, the generally immediately observable trend was for securities and bonds to fall, including the short term US T-Bond, although that fell only in a trivial sense. Australian RE didn't fall though. It rose. I tend to think at this time, we will have a lot more digital currencies appear, many scams, some real but with compromised models or security. The future of money is going digital.
With a debt based system (fiat USD and all spokes of the wheel), agreement to take on debt (principal + slavery) bears an unpleasant mathematical relationship with the pyramidal concept. Bitcoin is a step in the direction money needs to go . Soon, with 3d printing tech, via nano, metal, bio and polymer tech, we might even face a reinvention of the conditions that built the industrial and medical revolutions of the 17th and 18th centuries.
People using the same word for different meanings. Declining commodity prices are deflation but declining equity (or property for that matter) values are not deflation, since rising equity prices are not considered to be inflation.
Whilst I am not sure of the mechanism involved, I believe that the big ticket items of property, vehicles, equities etc will suffer from deflation. These tend to be the measure that people and institutions use to assess wealth. Many will be financially wiped out! Concurrent with this deflation, I also expect inflation for staples ie food, water, energy, essential services etc. It will be a real double whammy, with the result being the ranks of the lower classes being swelled by the former middle/upper classes. Further, with a shrinking revenue stream, the government of the day will raise taxes, by various means including increasing the GST rate.
Not to mention the emerging trend of outright wealth confiscation. ...and we're in an environment described by Gerard Minack (whom in 2007 at the height of the boom correctly predicted a halving of the All Ords from 6000 to just 3120) as "triple -layered leverage";
Inflation: a persistent increase in the general price level of goods and services Deflation: a decrease in the general price level of goods and services Stagflation: a situation where an inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high
Inflation: An increase in the money supply. which causes Price Inflation: a persistent increase in the general price level of goods and services
Is it just me or is there a lot more 'doom n gloom' about on the news wires of late? (including this deflationary stance) Is it real forecasting of an impending event or just seasonal ( i.e. Christmas) thing? Typically around this time of year, everyone is "talking it up" event with even the Bulls conceding a Xmas boost to the economy. I can't tell... been reading too much of this cr@p to have any perspective anymore...
Nah - I dont buy this deflation crisis talk. It just doesnt add up. I could agree with the idea that the need for jobs plummets and therefor nobody HAS money to drive prices of daily goods. But the people who HAVE the money will still be using it. I could also agree with disinflation as big corperate credit deleverages.... but actual deflation? I just dont see that being the case, although I can understand how it would FEEL like deflation - like a baby laying on a transparent glass bentch. But I dont think deflation. what do you guys think
To wit: Now add the Chinese money printing to the US, Europe and Japan to see where we are ... Source: http://www.zerohedge.com/news/2013-...k-liquification-china-humiliated-worlds-centr The Chinese politburo has been printing up its phony-baloney money and buying up the world ... gold, resources, corporations, infrastructure (ports, power, rail, etc.), businesses, commercial real estate, residential real estate ... politicians ... the lot. All on a free and equal trade basis of course.
^ China has always been a powder keg. They are so opaque in their financial dealings and corruption is rife. I wouldn't be surprised if the debt bomb is even greater than that.
I dont know if anyone is aware of this, but China can muster up to a 200million man army..... "Buy now, pay later? Fuk yeh! Ill be able to wait out a 50 year war now i have all these resources! And i wont pay a cent to my creditors...." Says china to a stupid world
A 200 million man army eh? I am IMPRESSED! Give them all an AK47 and tell them to swim to Taiwan (or Hawaii) ....and HYPER-defaltion is a misnomer. In the Great Depression they had a total of 25% DEflation over about 6 years (with one 10% reduction in wages) . 'Hyper' would have you buying a new Falcon for $15. OC
Interesting you say that, because the discussion had on Inside Business was that indeed, new cars would be cheaper in the future... however the cost of rego, taxes etc and putting petrol in it would be crippling. I'm not sure however if Australia would be the worst place in the world to be during this (speculative) looming deflationary/stagflationary maelstrom period. Sure, manufacturing & mining might be off the boil... but we do have a relatively well educated workforce (albeit lazy) that could adapt to emerging "industry". Agricultural commodities are in a different basket to the others so there may be a buffer for us there too...however deflationary SYMPTOMS will likely have a deleterious affect there too. if it even happens just sayin'
Are you sure? From my reckoning using this data, since 2008 they have accumulated a trade surplus of $1,338B US dollars. That is a long way short of the $70T approx. that their money supply (M2 - above) has grown by in that time or the $15.5T that their explicitly held central bank assets have grown by. Want to transfer some hot Yuan into Australia to buy some local assets? I'm pretty sure that's got nothing to do with foreign trade flows or accumulated US Treasuries. That looks like a Yuan transfer to an Australian account from which it will be converted directly to AUD.
Of course not but you are only speculating as well. Every fx conversion must have a counterparty taking th opposite side. If China has exported trillions of dollars worth of Yuan and converted them into dollars then someone is holding that Yuan - where are they ? More likely Yuan that is being exported to buy assets around the world is converted to USD by the Chinese govt acting to keep the peg, thus getting rid of their continually rising usd holdings that your graph points out.