[Fearful]

There is some truth behind it; if I were in an underwater house, I would be sorely tempted to stop making payments and wait for the sheriff to come. I could easily see it being a year until they get around to me, and in the meantime, there may well be a bailout headed my way.

I think we are seeing asset deflation on an tremendous scale; how quickly that translates to consumer price deflation is a complete mystery to me.

Can’t Fed and Treasury directly pump the (consumer) money supply by distributing a stimulus payment, issuing Treasury notes, and then buying those Treasury notes right back? It seems to me that the money supply can be pumped in a number of different ways, especially if deflationary expectations have not yet taken hold. If deflationary expectations have taken hold, then if Treasury issues stimulus payments, consumers will save the money, or use it to pay down debt, and the money supply will not be inflated. This was Japan’s trap, no?

The speed with which dollar strength subsequently changes will illustrate the extent to which we are in consumer price deflation. I do not think either inflation or deflation sets in as quickly as exchange rates have recently changed.

Chaos. We are in the midst of chaos that I find frankly alarming. The Nikkei is down 5% as I write this. I suspect the drop in the Nikkei is partly due to Sony’s poor forecast, which is partly due to increasing Yen strength, which makes Japanese exporters less competitive.

Eric

[Fearful]

There is some truth behind it; if I were in an underwater house, I would be sorely tempted to stop making payments and wait for the sheriff to come. I could easily see it being a year until they get around to me, and in the meantime, there may well be a bailout headed my way.

I think we are seeing asset deflation on an tremendous scale; how quickly that translates to consumer price deflation is a complete mystery to me.

Can’t Fed and Treasury directly pump the (consumer) money supply by distributing a stimulus payment, issuing Treasury notes, and then buying those Treasury notes right back? It seems to me that the money supply can be pumped in a number of different ways, especially if deflationary expectations have not yet taken hold. If deflationary expectations have taken hold, then if Treasury issues stimulus payments, consumers will save the money, or use it to pay down debt, and the money supply will not be inflated. This was Japan’s trap, no?

The speed with which dollar strength subsequently changes will illustrate the extent to which we are in consumer price deflation. I do not think either inflation or deflation sets in as quickly as exchange rates have recently changed.

Chaos. We are in the midst of chaos that I find frankly alarming. The Nikkei is down 5% as I write this. I suspect the drop in the Nikkei is partly due to Sony’s poor forecast, which is partly due to increasing Yen strength, which makes Japanese exporters less competitive.

Eric

[Fearful]

There is some truth behind it; if I were in an underwater house, I would be sorely tempted to stop making payments and wait for the sheriff to come. I could easily see it being a year until they get around to me, and in the meantime, there may well be a bailout headed my way.

I think we are seeing asset deflation on an tremendous scale; how quickly that translates to consumer price deflation is a complete mystery to me.

Can’t Fed and Treasury directly pump the (consumer) money supply by distributing a stimulus payment, issuing Treasury notes, and then buying those Treasury notes right back? It seems to me that the money supply can be pumped in a number of different ways, especially if deflationary expectations have not yet taken hold. If deflationary expectations have taken hold, then if Treasury issues stimulus payments, consumers will save the money, or use it to pay down debt, and the money supply will not be inflated. This was Japan’s trap, no?

The speed with which dollar strength subsequently changes will illustrate the extent to which we are in consumer price deflation. I do not think either inflation or deflation sets in as quickly as exchange rates have recently changed.

Chaos. We are in the midst of chaos that I find frankly alarming. The Nikkei is down 5% as I write this. I suspect the drop in the Nikkei is partly due to Sony’s poor forecast, which is partly due to increasing Yen strength, which makes Japanese exporters less competitive.

Eric

[Fearful]

[quote=barnaby33]
Fearful, all things are temporary care to hazard a guess? As to the unwinding of the carry, that is a knock on effect of the deflation. The Japanese have sustained enough losses that they are saying no mas. That currency is being repatriated yes, or rather parts of it are. I suspect that many of the Japanese banks that have been doing this are sustaining losses though which chills lending, which shrinks the money supply. Though I say up front I have no proof or insight.
Josh[/quote]
The Fed and Treasury are trying to keep the financial systems functioning. That is a much more pressing problem than inflation or the economy. One guess would be that once some semblance of financial system stability is reached, attention will be turned to the economy. This might happen over a month or so.

We are in such chaos that anything can happen. There are factions in China that are pushing for a move away from an export based economy – decoupling. The economic situation is weakening fast in China, and why would not the country start spending its $1.8 trillion in foreign exchange reserves to bolster the internal economy?

Conversely, the rest of the world could fall apart and the U.S. is the only economy left (relatively) standing – and the interested parties wish to preserve the financial status quo. The dollar would rise pretty rapidly in that case.

Whatever happens, it seems to be accelerating. Feedback loops galore! I thought of another one: Homeowner bailouts could worsen the situation, as the prospect of a bailout will increase the propensity for people to simply stop paying their mortgages. I, for one, would love to be in an underwater house right now.

Eric

[Fearful]

[quote=barnaby33]
Fearful, all things are temporary care to hazard a guess? As to the unwinding of the carry, that is a knock on effect of the deflation. The Japanese have sustained enough losses that they are saying no mas. That currency is being repatriated yes, or rather parts of it are. I suspect that many of the Japanese banks that have been doing this are sustaining losses though which chills lending, which shrinks the money supply. Though I say up front I have no proof or insight.
Josh[/quote]
The Fed and Treasury are trying to keep the financial systems functioning. That is a much more pressing problem than inflation or the economy. One guess would be that once some semblance of financial system stability is reached, attention will be turned to the economy. This might happen over a month or so.

We are in such chaos that anything can happen. There are factions in China that are pushing for a move away from an export based economy – decoupling. The economic situation is weakening fast in China, and why would not the country start spending its $1.8 trillion in foreign exchange reserves to bolster the internal economy?

Conversely, the rest of the world could fall apart and the U.S. is the only economy left (relatively) standing – and the interested parties wish to preserve the financial status quo. The dollar would rise pretty rapidly in that case.

Whatever happens, it seems to be accelerating. Feedback loops galore! I thought of another one: Homeowner bailouts could worsen the situation, as the prospect of a bailout will increase the propensity for people to simply stop paying their mortgages. I, for one, would love to be in an underwater house right now.

Eric

[Fearful]

[quote=barnaby33]
Fearful, all things are temporary care to hazard a guess? As to the unwinding of the carry, that is a knock on effect of the deflation. The Japanese have sustained enough losses that they are saying no mas. That currency is being repatriated yes, or rather parts of it are. I suspect that many of the Japanese banks that have been doing this are sustaining losses though which chills lending, which shrinks the money supply. Though I say up front I have no proof or insight.
Josh[/quote]
The Fed and Treasury are trying to keep the financial systems functioning. That is a much more pressing problem than inflation or the economy. One guess would be that once some semblance of financial system stability is reached, attention will be turned to the economy. This might happen over a month or so.

We are in such chaos that anything can happen. There are factions in China that are pushing for a move away from an export based economy – decoupling. The economic situation is weakening fast in China, and why would not the country start spending its $1.8 trillion in foreign exchange reserves to bolster the internal economy?

Conversely, the rest of the world could fall apart and the U.S. is the only economy left (relatively) standing – and the interested parties wish to preserve the financial status quo. The dollar would rise pretty rapidly in that case.

Whatever happens, it seems to be accelerating. Feedback loops galore! I thought of another one: Homeowner bailouts could worsen the situation, as the prospect of a bailout will increase the propensity for people to simply stop paying their mortgages. I, for one, would love to be in an underwater house right now.

Eric

[Fearful]

[quote=barnaby33]
Fearful, all things are temporary care to hazard a guess? As to the unwinding of the carry, that is a knock on effect of the deflation. The Japanese have sustained enough losses that they are saying no mas. That currency is being repatriated yes, or rather parts of it are. I suspect that many of the Japanese banks that have been doing this are sustaining losses though which chills lending, which shrinks the money supply. Though I say up front I have no proof or insight.
Josh[/quote]
The Fed and Treasury are trying to keep the financial systems functioning. That is a much more pressing problem than inflation or the economy. One guess would be that once some semblance of financial system stability is reached, attention will be turned to the economy. This might happen over a month or so.

We are in such chaos that anything can happen. There are factions in China that are pushing for a move away from an export based economy – decoupling. The economic situation is weakening fast in China, and why would not the country start spending its $1.8 trillion in foreign exchange reserves to bolster the internal economy?

Conversely, the rest of the world could fall apart and the U.S. is the only economy left (relatively) standing – and the interested parties wish to preserve the financial status quo. The dollar would rise pretty rapidly in that case.

Whatever happens, it seems to be accelerating. Feedback loops galore! I thought of another one: Homeowner bailouts could worsen the situation, as the prospect of a bailout will increase the propensity for people to simply stop paying their mortgages. I, for one, would love to be in an underwater house right now.

Eric

[Fearful]

[quote=barnaby33]
Fearful, all things are temporary care to hazard a guess? As to the unwinding of the carry, that is a knock on effect of the deflation. The Japanese have sustained enough losses that they are saying no mas. That currency is being repatriated yes, or rather parts of it are. I suspect that many of the Japanese banks that have been doing this are sustaining losses though which chills lending, which shrinks the money supply. Though I say up front I have no proof or insight.
Josh[/quote]
The Fed and Treasury are trying to keep the financial systems functioning. That is a much more pressing problem than inflation or the economy. One guess would be that once some semblance of financial system stability is reached, attention will be turned to the economy. This might happen over a month or so.

We are in such chaos that anything can happen. There are factions in China that are pushing for a move away from an export based economy – decoupling. The economic situation is weakening fast in China, and why would not the country start spending its $1.8 trillion in foreign exchange reserves to bolster the internal economy?

Conversely, the rest of the world could fall apart and the U.S. is the only economy left (relatively) standing – and the interested parties wish to preserve the financial status quo. The dollar would rise pretty rapidly in that case.

Whatever happens, it seems to be accelerating. Feedback loops galore! I thought of another one: Homeowner bailouts could worsen the situation, as the prospect of a bailout will increase the propensity for people to simply stop paying their mortgages. I, for one, would love to be in an underwater house right now.

Eric

[Fearful]

Regarding the original post, I would not draw such strong conclusions from the exchange rates. As I understand it, we are seeing both a flight to quality – buying the safest investments around – and, in other countries, unwinding “carry trades”. Neither of these is deflation.

It seems that deflation is likely, as the shrinking of the debt and asset bubble sucks cash from the economy, and slows it down further as it sucks out cash. But I saw it noted that Japan only got into deflation four years into its crash. Maybe things move faster nowadays.

I cannot understand why Ben is keeping the FFR anywhere above 0%. Maybe he is so preoccupied with the financial system he is not noticing the rapid slowdown in the economy.

The dollar’s strength is likely temporary, as bad news will continue to emerge from the U.S. economy, and the Fed and Treasury will support a weakened dollar in order to prop up our export economy. The current situation seems unsustainable.

Disclaimer: I have a vested interest in a weaker dollar, as I diversified from U.S.$ about four months ago, and have lost heavily since then. Well, it seemed like a good idea at the time.

[Fearful]

Regarding the original post, I would not draw such strong conclusions from the exchange rates. As I understand it, we are seeing both a flight to quality – buying the safest investments around – and, in other countries, unwinding “carry trades”. Neither of these is deflation.

It seems that deflation is likely, as the shrinking of the debt and asset bubble sucks cash from the economy, and slows it down further as it sucks out cash. But I saw it noted that Japan only got into deflation four years into its crash. Maybe things move faster nowadays.

I cannot understand why Ben is keeping the FFR anywhere above 0%. Maybe he is so preoccupied with the financial system he is not noticing the rapid slowdown in the economy.

The dollar’s strength is likely temporary, as bad news will continue to emerge from the U.S. economy, and the Fed and Treasury will support a weakened dollar in order to prop up our export economy. The current situation seems unsustainable.

Disclaimer: I have a vested interest in a weaker dollar, as I diversified from U.S.$ about four months ago, and have lost heavily since then. Well, it seemed like a good idea at the time.

[Fearful]

Regarding the original post, I would not draw such strong conclusions from the exchange rates. As I understand it, we are seeing both a flight to quality – buying the safest investments around – and, in other countries, unwinding “carry trades”. Neither of these is deflation.

It seems that deflation is likely, as the shrinking of the debt and asset bubble sucks cash from the economy, and slows it down further as it sucks out cash. But I saw it noted that Japan only got into deflation four years into its crash. Maybe things move faster nowadays.

I cannot understand why Ben is keeping the FFR anywhere above 0%. Maybe he is so preoccupied with the financial system he is not noticing the rapid slowdown in the economy.

The dollar’s strength is likely temporary, as bad news will continue to emerge from the U.S. economy, and the Fed and Treasury will support a weakened dollar in order to prop up our export economy. The current situation seems unsustainable.

Disclaimer: I have a vested interest in a weaker dollar, as I diversified from U.S.$ about four months ago, and have lost heavily since then. Well, it seemed like a good idea at the time.

[Fearful]

Regarding the original post, I would not draw such strong conclusions from the exchange rates. As I understand it, we are seeing both a flight to quality – buying the safest investments around – and, in other countries, unwinding “carry trades”. Neither of these is deflation.

It seems that deflation is likely, as the shrinking of the debt and asset bubble sucks cash from the economy, and slows it down further as it sucks out cash. But I saw it noted that Japan only got into deflation four years into its crash. Maybe things move faster nowadays.

I cannot understand why Ben is keeping the FFR anywhere above 0%. Maybe he is so preoccupied with the financial system he is not noticing the rapid slowdown in the economy.

The dollar’s strength is likely temporary, as bad news will continue to emerge from the U.S. economy, and the Fed and Treasury will support a weakened dollar in order to prop up our export economy. The current situation seems unsustainable.

Disclaimer: I have a vested interest in a weaker dollar, as I diversified from U.S.$ about four months ago, and have lost heavily since then. Well, it seemed like a good idea at the time.

[Fearful]

Regarding the original post, I would not draw such strong conclusions from the exchange rates. As I understand it, we are seeing both a flight to quality – buying the safest investments around – and, in other countries, unwinding “carry trades”. Neither of these is deflation.

It seems that deflation is likely, as the shrinking of the debt and asset bubble sucks cash from the economy, and slows it down further as it sucks out cash. But I saw it noted that Japan only got into deflation four years into its crash. Maybe things move faster nowadays.

I cannot understand why Ben is keeping the FFR anywhere above 0%. Maybe he is so preoccupied with the financial system he is not noticing the rapid slowdown in the economy.

The dollar’s strength is likely temporary, as bad news will continue to emerge from the U.S. economy, and the Fed and Treasury will support a weakened dollar in order to prop up our export economy. The current situation seems unsustainable.

Disclaimer: I have a vested interest in a weaker dollar, as I diversified from U.S.$ about four months ago, and have lost heavily since then. Well, it seemed like a good idea at the time.

[Fearful]

No doubt the Inland Empire defaults are horrible news. However, I am puzzled why SD county did not follow.

[Fearful]

No doubt the Inland Empire defaults are horrible news. However, I am puzzled why SD county did not follow.

[Author]

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