Shiller: US could likely to fall into deflationary spiral ala Japan

[SD Transplant]

Here is what Chris Martenson has to say on the subject 🙂

http://finance.yahoo.com/tech-ticker/article/535305/Inflation-or-Deflation%3F-%22Yes,%22-Says-Chris-Martenson,-Who-Sees-Stagflation-Coming

This second round of quantitative easing is meant to lower mortgage rates (boost the housing market) and increase demand for bank loans (grow the economy).

Yet many reading this must be thinking: What deflation? Prices of gasoline, food, health-care, education are all getting more expensive.

Ask Chris Martenson, inflation or deflation? The economic researcher responds, “Yes!”

“We’re seeing inflation in some areas and deflation in others,” he tells Tech Ticker in this clip. “We have powerful deflationary forces in play right now. It’s been well balanced, so far, by what the Fed has done.”

Martenson thinks we’re “dangerously close” to entering a stage of “stagflation” that crippled the economy and market in the 1970s. “It’s the worst of all possible worlds,” says Martenson. “(Stagflation) really squeezes the workers even harder than any other condition you can experience. Wages are weak. Job growth is weak. The main assets that the average person tends to hold like real estate – that’s going down. On the other side, we are seeing base inflation” in some commodities.

“Stagflation,” as defined by Investopedia, is: a condition of slow economic growth and relatively high unemployment — a time of stagnation — accompanied by a rise in prices, or inflation. The U.S. dealt with this in the 1970s when a recession was met with a spike in global oil prices.

With these risks on the horizon, Martenson is convinced a double-dip recession is imminent, if not already under way: “The early data is saying, ‘weakness still is here’ and we’re going to have to live with this for a while,” he says.

As a result, he’s convinced Fed chairman Ben Bernanke will continue to go back into his “tool box” in the near-term to try to help put the economy back on a path of inflation and growth. “All the signs are telling us that the Fed can go forward and expand their balance sheet and so far they’ve been able to get away with it,” he says.

But eventually, Martenson believes these actions to fight near-term problems will result in nearly insurmountable long-term dilemmas for the government

[briansd1]

[quote=SD Transplant]

With these risks on the horizon, Martenson is convinced a double-dip recession is imminent, if not already under way: “The early data is saying, ‘weakness still is here’ and we’re going to have to live with this for a while,” he says. [/quote]

I guess at the trough of the double dip, house prices and interest rates will be at the lowest. Good for the those looking to buy. 🙂

[briansd1]

[quote=SD Transplant]

With these risks on the horizon, Martenson is convinced a double-dip recession is imminent, if not already under way: “The early data is saying, ‘weakness still is here’ and we’re going to have to live with this for a while,” he says. [/quote]

I guess at the trough of the double dip, house prices and interest rates will be at the lowest. Good for the those looking to buy. 🙂

[briansd1]

[quote=SD Transplant]

With these risks on the horizon, Martenson is convinced a double-dip recession is imminent, if not already under way: “The early data is saying, ‘weakness still is here’ and we’re going to have to live with this for a while,” he says. [/quote]

I guess at the trough of the double dip, house prices and interest rates will be at the lowest. Good for the those looking to buy. 🙂

[briansd1]

[quote=SD Transplant]

With these risks on the horizon, Martenson is convinced a double-dip recession is imminent, if not already under way: “The early data is saying, ‘weakness still is here’ and we’re going to have to live with this for a while,” he says. [/quote]

I guess at the trough of the double dip, house prices and interest rates will be at the lowest. Good for the those looking to buy. 🙂

[briansd1]

[quote=SD Transplant]

With these risks on the horizon, Martenson is convinced a double-dip recession is imminent, if not already under way: “The early data is saying, ‘weakness still is here’ and we’re going to have to live with this for a while,” he says. [/quote]

I guess at the trough of the double dip, house prices and interest rates will be at the lowest. Good for the those looking to buy. 🙂

[XBoxBoy]

[quote=Rich Toscano]
(Check today’s admission that the FOMC will engage in further QE for the latest exhibit).
[/quote]

I’m assuming you’re referring to the fed’s announcement that they will reinvest principle from treasuries and other securities that have matured and been paid off. How is that quantitative easing? I thought quantitative easing was when the fed printed (created) new money and bought assets with newly created money. If they receive money for maturing securities and then reinvest that money where is the QE? If that’s not what you’re referring to then I’m curious, what policy are you referring to?

[XBoxBoy]

[quote=Rich Toscano]
(Check today’s admission that the FOMC will engage in further QE for the latest exhibit).
[/quote]

I’m assuming you’re referring to the fed’s announcement that they will reinvest principle from treasuries and other securities that have matured and been paid off. How is that quantitative easing? I thought quantitative easing was when the fed printed (created) new money and bought assets with newly created money. If they receive money for maturing securities and then reinvest that money where is the QE? If that’s not what you’re referring to then I’m curious, what policy are you referring to?

[XBoxBoy]

[quote=Rich Toscano]
(Check today’s admission that the FOMC will engage in further QE for the latest exhibit).
[/quote]

I’m assuming you’re referring to the fed’s announcement that they will reinvest principle from treasuries and other securities that have matured and been paid off. How is that quantitative easing? I thought quantitative easing was when the fed printed (created) new money and bought assets with newly created money. If they receive money for maturing securities and then reinvest that money where is the QE? If that’s not what you’re referring to then I’m curious, what policy are you referring to?

[XBoxBoy]

[quote=Rich Toscano]
(Check today’s admission that the FOMC will engage in further QE for the latest exhibit).
[/quote]

I’m assuming you’re referring to the fed’s announcement that they will reinvest principle from treasuries and other securities that have matured and been paid off. How is that quantitative easing? I thought quantitative easing was when the fed printed (created) new money and bought assets with newly created money. If they receive money for maturing securities and then reinvest that money where is the QE? If that’s not what you’re referring to then I’m curious, what policy are you referring to?

[XBoxBoy]

[quote=Rich Toscano]
(Check today’s admission that the FOMC will engage in further QE for the latest exhibit).
[/quote]

I’m assuming you’re referring to the fed’s announcement that they will reinvest principle from treasuries and other securities that have matured and been paid off. How is that quantitative easing? I thought quantitative easing was when the fed printed (created) new money and bought assets with newly created money. If they receive money for maturing securities and then reinvest that money where is the QE? If that’s not what you’re referring to then I’m curious, what policy are you referring to?

[Rich Toscano]

[quote=Eugene]
All that happens is that additional money is transferred to investors who sell existing Treasury bonds to the Fed. It’s certainly money creation, but the effect this would have on consumer demand and inflation is almost negligible.[/quote]

…which allows them to spend it on something else. (Of course they may spend it on other investments, perhaps that’s what you are getting at).

They can always cut taxes and finance the difference with newly printed money, which as Bernanke famously noted, would be akin to dropping money from helicopters.

[Rich Toscano]

[quote=Eugene]
All that happens is that additional money is transferred to investors who sell existing Treasury bonds to the Fed. It’s certainly money creation, but the effect this would have on consumer demand and inflation is almost negligible.[/quote]

…which allows them to spend it on something else. (Of course they may spend it on other investments, perhaps that’s what you are getting at).

They can always cut taxes and finance the difference with newly printed money, which as Bernanke famously noted, would be akin to dropping money from helicopters.

[Rich Toscano]

[quote=Eugene]
All that happens is that additional money is transferred to investors who sell existing Treasury bonds to the Fed. It’s certainly money creation, but the effect this would have on consumer demand and inflation is almost negligible.[/quote]

…which allows them to spend it on something else. (Of course they may spend it on other investments, perhaps that’s what you are getting at).

They can always cut taxes and finance the difference with newly printed money, which as Bernanke famously noted, would be akin to dropping money from helicopters.

[Rich Toscano]

[quote=Eugene]
All that happens is that additional money is transferred to investors who sell existing Treasury bonds to the Fed. It’s certainly money creation, but the effect this would have on consumer demand and inflation is almost negligible.[/quote]

…which allows them to spend it on something else. (Of course they may spend it on other investments, perhaps that’s what you are getting at).

They can always cut taxes and finance the difference with newly printed money, which as Bernanke famously noted, would be akin to dropping money from helicopters.

[Author]

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