interesting read….

[patientrenter]

The great deflation vs inflation debate.

In a free-market economy, with the state we’re in today – way over-borrowed – deflation is the clear outcome.

But we absolutely do not live in a free-market economy. Inflation seems to be the easiest way for most homeowners (= most voters) to default (in terms of real value) on their mortgages whilst keeping their homes. I’ve concluded that whatever makes the vast majority of voters happiest is what ultimately happens.

Saying that we’ll have deflation and that the resulting crisis in the home mortgage markets will be resolved by a govt bail-out instead just begs the question of what’s next. A bail-out moves responsibility to the govt for repaying all the investors in mortgages. A lot of those investors are foreign. Repaying them will become burdensome, and that next problem will then be solved through…… you got it! Inflation.

Patient renter in OC

[bsrsharma]

My guess is we will not have Zimbabwe style inflation, but a stagflation similar to 1974-82. That happened after a long and costly unpopular war that had to be financed indirectly through inflation rather than direct sacrifice by citizens through taxation. The long and expensive wars we are fighting now are also going to be financed by inflation rather than taxation.

[bsrsharma]

My guess is we will not have Zimbabwe style inflation, but a stagflation similar to 1974-82. That happened after a long and costly unpopular war that had to be financed indirectly through inflation rather than direct sacrifice by citizens through taxation. The long and expensive wars we are fighting now are also going to be financed by inflation rather than taxation.

[bsrsharma]

My guess is we will not have Zimbabwe style inflation, but a stagflation similar to 1974-82. That happened after a long and costly unpopular war that had to be financed indirectly through inflation rather than direct sacrifice by citizens through taxation. The long and expensive wars we are fighting now are also going to be financed by inflation rather than taxation.

[bsrsharma]

My guess is we will not have Zimbabwe style inflation, but a stagflation similar to 1974-82. That happened after a long and costly unpopular war that had to be financed indirectly through inflation rather than direct sacrifice by citizens through taxation. The long and expensive wars we are fighting now are also going to be financed by inflation rather than taxation.

[bsrsharma]

My guess is we will not have Zimbabwe style inflation, but a stagflation similar to 1974-82. That happened after a long and costly unpopular war that had to be financed indirectly through inflation rather than direct sacrifice by citizens through taxation. The long and expensive wars we are fighting now are also going to be financed by inflation rather than taxation.

[bsrsharma]

duplicate

[bsrsharma]

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[bsrsharma]

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[bsrsharma]

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[bsrsharma]

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[pemeliza]

esmith:

“Every commodity that can be cheaply stored for extended periods of time is a bubble”

Ah then by your definition OIL is a bubble because it would be the most non-perishable commodity on the planet.

But … it isn’t a bubble because there is a shortage and we use as much as we can produce.

But … you never considered that there actually may be a genuine shortage in certain grains. Wheat for example. The push for ethanol has led to growers putting out record corn crops at the expense of soybean acres. What does this to the bean supply? But then beans go up and more acres for beans, etc. etc. The bottom line is that with the droughts and increased demand there is not a super surplus of grains anymore. There are so many tillable acres and climate change is occuring. We have to feed all those darn chickens and cows with something.

I agree the prices are frothy at these points and I would say there is a certain bubble element to them. But the days of $2 corn are over. Noone can grow it for that given the spectacular rise in input costs.

“The only reason we see (price) inflation is because of appreciating oil and bubbles in various commodities.”

Why stop there? How about the following statement which would be just as hard to refute:

“The only reason we EVER see (price) inflation is because of bubbles in various goods and services.”

Since all price inflation can be explained away via bubble theories it is best to measure monetary inflation. But you argue there hasn’t been any of that either. Geez I wonder where all the money comes up from to blow all the bubbles then?

Never mind the fact that countries like Japan and China have been exporting monetary inflation in the form of cheap long bonds and carry trades for some time now.

I’m not arguing that there isn’t some degree of truth to your statements but just that there are IMHO some oversimplifications.

[pemeliza]

esmith:

“Every commodity that can be cheaply stored for extended periods of time is a bubble”

Ah then by your definition OIL is a bubble because it would be the most non-perishable commodity on the planet.

But … it isn’t a bubble because there is a shortage and we use as much as we can produce.

But … you never considered that there actually may be a genuine shortage in certain grains. Wheat for example. The push for ethanol has led to growers putting out record corn crops at the expense of soybean acres. What does this to the bean supply? But then beans go up and more acres for beans, etc. etc. The bottom line is that with the droughts and increased demand there is not a super surplus of grains anymore. There are so many tillable acres and climate change is occuring. We have to feed all those darn chickens and cows with something.

I agree the prices are frothy at these points and I would say there is a certain bubble element to them. But the days of $2 corn are over. Noone can grow it for that given the spectacular rise in input costs.

“The only reason we see (price) inflation is because of appreciating oil and bubbles in various commodities.”

Why stop there? How about the following statement which would be just as hard to refute:

“The only reason we EVER see (price) inflation is because of bubbles in various goods and services.”

Since all price inflation can be explained away via bubble theories it is best to measure monetary inflation. But you argue there hasn’t been any of that either. Geez I wonder where all the money comes up from to blow all the bubbles then?

Never mind the fact that countries like Japan and China have been exporting monetary inflation in the form of cheap long bonds and carry trades for some time now.

I’m not arguing that there isn’t some degree of truth to your statements but just that there are IMHO some oversimplifications.

[pemeliza]

esmith:

“Every commodity that can be cheaply stored for extended periods of time is a bubble”

Ah then by your definition OIL is a bubble because it would be the most non-perishable commodity on the planet.

But … it isn’t a bubble because there is a shortage and we use as much as we can produce.

But … you never considered that there actually may be a genuine shortage in certain grains. Wheat for example. The push for ethanol has led to growers putting out record corn crops at the expense of soybean acres. What does this to the bean supply? But then beans go up and more acres for beans, etc. etc. The bottom line is that with the droughts and increased demand there is not a super surplus of grains anymore. There are so many tillable acres and climate change is occuring. We have to feed all those darn chickens and cows with something.

I agree the prices are frothy at these points and I would say there is a certain bubble element to them. But the days of $2 corn are over. Noone can grow it for that given the spectacular rise in input costs.

“The only reason we see (price) inflation is because of appreciating oil and bubbles in various commodities.”

Why stop there? How about the following statement which would be just as hard to refute:

“The only reason we EVER see (price) inflation is because of bubbles in various goods and services.”

Since all price inflation can be explained away via bubble theories it is best to measure monetary inflation. But you argue there hasn’t been any of that either. Geez I wonder where all the money comes up from to blow all the bubbles then?

Never mind the fact that countries like Japan and China have been exporting monetary inflation in the form of cheap long bonds and carry trades for some time now.

I’m not arguing that there isn’t some degree of truth to your statements but just that there are IMHO some oversimplifications.

[pemeliza]

esmith:

“Every commodity that can be cheaply stored for extended periods of time is a bubble”

Ah then by your definition OIL is a bubble because it would be the most non-perishable commodity on the planet.

But … it isn’t a bubble because there is a shortage and we use as much as we can produce.

But … you never considered that there actually may be a genuine shortage in certain grains. Wheat for example. The push for ethanol has led to growers putting out record corn crops at the expense of soybean acres. What does this to the bean supply? But then beans go up and more acres for beans, etc. etc. The bottom line is that with the droughts and increased demand there is not a super surplus of grains anymore. There are so many tillable acres and climate change is occuring. We have to feed all those darn chickens and cows with something.

I agree the prices are frothy at these points and I would say there is a certain bubble element to them. But the days of $2 corn are over. Noone can grow it for that given the spectacular rise in input costs.

“The only reason we see (price) inflation is because of appreciating oil and bubbles in various commodities.”

Why stop there? How about the following statement which would be just as hard to refute:

“The only reason we EVER see (price) inflation is because of bubbles in various goods and services.”

Since all price inflation can be explained away via bubble theories it is best to measure monetary inflation. But you argue there hasn’t been any of that either. Geez I wonder where all the money comes up from to blow all the bubbles then?

Never mind the fact that countries like Japan and China have been exporting monetary inflation in the form of cheap long bonds and carry trades for some time now.

I’m not arguing that there isn’t some degree of truth to your statements but just that there are IMHO some oversimplifications.

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