A Case for Deflation

S

spets1

New Member
in this post it states:

"The Fed has been dumping roughly $4 billion of thin-air money into the US markets each trading day since November 2010"
src: http://www.zerohedge.com/article/guest-post-coming-rout

From this graph: http://www.chartingstocks.net/wp-content/uploads/2009/03/money-supply.gif

It can be roughly estimated that US monetary base has increased by 1000 billion in 2008.

1000/365* = 2.7 billion a day. (does FED take days off on public holidays?)

Thats alot of paper btw (think of the trees!)

So the above 4 billion a day seems like a plausible figure.

This 4 billion a day has been keeping up the growth of the Markets.

The writer of the article suggests that QE2 is going to end sometime around June.
QE3 has not been announced publically yet. And Even if it is (highly likely) It is going to be a few months before it is put into effect.

This means the market will be losing 4 billion a day. Therefore there won't be enough money to keep the prices up/inflated and deflation will happen.

Therefore prices will crash for all the stocks and even for percious metals (silver/gold).

I do share his opinion, this is why I will be holding off buying any more silver/gold till the said crash comes along between the QE's.


What do you guys think?
 
speaking of deflation.. coles and wollies are covered in permanent price reductions. Most ppl i talk to seem to think this is competition (ROFLOL), but is it possible it is deflation?
 
I'd say that's more a case of price deflation rather than monetary deflation. People often use the terms "inflation" and "deflation" with some disregard to these important differences.

So we're witnessing "price deflation" with bread, milk and now cereal in that they are cheaper to buy in outright dollar terms - but it is being driven by competition, not by a reduction in the overall monetary supply.
 
This is what Coles/Woolies are doing to kill off stand alone farmers, and smaller shops. They are reducing the price on groceries while the floods and natural disasters are pushing the prices up. This way they want to put smaller competition out of business and have a better mono/duopoly in the market.

Look up "milk price wars". And try to limit your buying at woolies/coles.
 
I don't understand how Coles/Woolworths cutting the prices of milk affects the farmers. I thought they did this by reducing their margin, ie the farmer is still getting paid the same amount.
 
During inflationary times, such as printing money, I wouldn't be surprised to see items on the CPI list manipulated down.
 
Ouch said:
I don't understand how Coles/Woolworths cutting the prices of milk affects the farmers. I thought they did this by reducing their margin, ie the farmer is still getting paid the same amount.
Click to expand...

Coles and Woolworths are only buying from select farmers, while the rest will suffer and go out of business because consumers won't buy their product.

This is going a little deeper but I imagine the end target is to introduce genetically modified milk to Australia (which has been introduced in USA already, but is not allowed in Aus currently).
 
spets1 said:
Ouch said:
I don't understand how Coles/Woolworths cutting the prices of milk affects the farmers. I thought they did this by reducing their margin, ie the farmer is still getting paid the same amount.
Click to expand...

Coles and Woolworths are only buying from select farmers, while the rest will suffer and go out of business because consumers won't buy their product.

This is going a little deeper but I imagine the end target is to introduce genetically modified milk to Australia (which has been introduced in USA already, but is not allowed in Aus currently).
Click to expand...

Surely Gillard can stamp that one too while shes at it
 
If QE stops deflation will set in no doubt in my mind, but Bernanke will not let that happen, print print print. on the current path Stagflation is and will be an issue. Then Hyperinflation (especially if everyone stops using the USD as the reserve)
people forget that Inflation is a result of an Increase in Money Supply, deflation is a decrease in Money Supply. So what is BB doing? increasing the money supply. If he allows a decrease (when everyone starts paying off debt) in money supply deflation will happen. Does anyone believe he will allow this?? Even Geithner has bailed to Europe to plead with the ECB not to raise rates.

As for Australia. What GP said price deflation is not monetary deflation. Money Supply is the issue in Australia also. Which brings me to my next Theory.
If Australia has an internal crisis, say a housing bubble bursts, businesses and Individuals will stop spending and pay down as much debt as they can as fast as they can and some will go insolvent, which will cause deflation here...BUT silver is priced in USD, our dollar in this scenario will collapse, silver will go north and i highly doubt that Aussies selling silver positions (industrial or investment) will effect the price too much.

poke holes if you may! :)
 
I just finished reading this weeks news letters from Diggers and Drillers (Dr. Alex Cowie) and Australian Wealth Game (Dan Denning).

In his newsletter issued 1 week ago. Dan very accurately wrote that we can expect to see a down-tun in the share market this week. He was correct.

From the latest newsletter, the view is that QE3 will not go ahead since the Fed. will try to put a halt to inflating oil prices which is becoming a counterintuitive side effect of QE II. In his view it will see another run to the US $ because of a) increased yield and b) general slow down in emerging markets. The lack of money from QE II is expected to lead to major slumps in the share market, commodities and in turn a re-valuing of the AU $. This all points to deflationary events about which we seem know the least about.
 
spets1 said:
And try to limit your buying at woolies/coles.
Click to expand...



That's what I'm doing.


Better quality and service at a cheaper price at your local butcher and fruit & veg shop.
 
It's a duopoly, the farmers literally HAVE to sell to Coles/woolies or they won't have anyone to sell to. Retail price of $1/litre, once you add the middleman, transport, treatment, storage, packaging etc I can't imagine the farmer would get more than 15-20 cents per litre

The duopoly price manipulation will just lead to higher prices in the future.
 
The milk thing is a deal making exercise between the middlemen and retailers.

Coles makes a deal for X litres at y cents per litre, where X is a huge number and y is a little number.

The middleman does this, but then charges Y cents for x litres to other packagers thereby subsidising Coles' milk by the smaller users.
 
intelligencer said:
The milk thing is a deal making exercise between the middlemen and retailers.

Coles makes a deal for X litres at y cents per litre, where X is a huge number and y is a little number.

The middleman does this, but then charges Y cents for x litres to other packagers thereby subsidising Coles' milk by the smaller users.
Click to expand...

I don't think it is a deal between Coles and it's home brand supplier, National Foods. It's purely a marketing ploy that Coles did to draw customers from Woolies. Now if it has other consequences then I'm sure Coles doesn't give a rat's. Apparently Coles is absorbing the cost (and probably passing it on to other produce, branded milk included). The concern will be when the current milk contracts that National Foods and Parmalat have with farmers expire, then, the farm gate will feel the pressure from the duopolies.

http://www.smartcompany.com.au/agri...all-retailers-as-woolworths-blames-coles.html

http://www.thefarmtrader.com.au/articles/coles-are-milk-prices-sustainable

National Foods and Parmalat also produce every well known brand label milk eg Dairy farmers, Pauls etc. of course they're concerned that home-branded milk will draw consumers away from their products.

3 year contracts for farmers in Tassie are up for renewal in June. It will be interesting to see whether Coles and Woolies still sell milk for $1/litre once the new contracts are signed.

Another question that would be interesting to propose, should the Fed Govt do anything about it? Or just let the market powers sort it out.
 
When they say that they are 'absorbing' the costs, it should be implied that everyone else in the chain from woolies/coles down to the cow, are
still receiving the same amount as before the price drop.

if that were the truth than its a marketing thing and should be temporary.
they want to score some brownies with us, counting on us buying more over there.
Same as the discount on fuel with the cars. now they are discounting the cost of human liquid fuels.
 
Let me assure you that nothing is getting any cheaper in the U.S. With the exception of housing, but adjusted for inflation and accounting for the increases in property taxes, insurance, and utilities, then housing is still likely becoming more expensive annually.
 
THUCYDIDES79 said:
When they say that they are 'absorbing' the costs, it should be implied that everyone else in the chain from woolies/coles down to the cow, are
still receiving the same amount as before the price drop.

if that were the truth than its a marketing thing and should be temporary.
they want to score some brownies with us, counting on us buying more over there.
Same as the discount on fuel with the cars. now they are discounting the cost of human liquid fuels.
Click to expand...

Apparently true, that's what they say. Costs absorbed - for now
 
Increasing costs will have a serious effect on business liquidity. This will ultimately lead to a market crash if the problem isn't dealt with. And that problem is not true monetary inflation, but rather speculation which is the false inflation caused by bank bailouts with hot money injected by the Federal Reserve. When the Feds remove the crutches (QE, bond purchases, POMO, etc) then the markets will collapse of their own accord, as they should.

Only certain equities will survive the next wave down, and of course, PMs will remain intact as they will never go to zero. Houses could fall 90% depending on the absolute severity of the depression. Now is NOT a time to be taking out a home loan, to be sure.
 
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