Deflation vs Inflation

Off Topic Politics & World Issues
41

[quote]John S. wrote:
http://www.schiffforsenate.com/index.php/site/videos/the_dollar_breaking_down_gold_breaking_out_9_9_09_moneybomb/

I would listen to the whole thing, but if you don’t want to start listening at about 2:10[/quote]

Peter Schiff is wrong about what drives gold prices. It’s not inflation/deflation per se, but credit worries. See my “gold moves” thread. The fact is that we’re deflating now. The CPI lags inflation/deflation as Schiff says, but we can look at wages, credit expansion/contraction, foreclosures, t-bonds, etc, to see where it’s headed for a much more accurate picture of inflation rather than the price of gold. We’ve had inflation pretty much the entire time we’ve been off the gold standard completely since the 70s, and gold has gone up and down several times since then.

42

[quote]PRCalDude wrote:
Also ask yourself why the stock market is going up. I’m no analyst but I would bet it is due to a lot of institutional investors parking their money in the companies that are hording cash instead of loaning it out to businesses that want to expand.

I think we’re having bear market rallies. During the 1930s, the stock market continued to climb but the United States had the largest industrial base in the world, thus the companies listed on the stock exchange had real value. Nowadays, this is not the case. We’re overwhelmingly importers, thus we need consumption to go back up to pre-crash levels in order to get corporate profits back to where they were. The problem is that the only way we can get consumption up is to get people using consumer credit again. Real wages haven’t climbed in 10 years at least, so people aren’t making more money. But there’s already so much debt out there and the banks are so far in the red that there’s really no way to get people into more debt to get consumption back up.

Of course, we could try bringing manufacturing back to this country or at least reducing the burden on businesses to operate here so we can get some more job creation. This would be a real fix to the problem. [/quote]

At this point, I think the burden on America’s businesses is too large to bring manufacturing back to this country (taxes, minimum wage, OSHA, all kinds of other shit). It would be a lot to undo at this point.

43

I guess only time will tell, right now me and JEATON have a 8 week bet.

Gold is at $1018.12

44

[quote]LankyMofo wrote:
PRCalDude wrote:
Also ask yourself why the stock market is going up. I’m no analyst but I would bet it is due to a lot of institutional investors parking their money in the companies that are hording cash instead of loaning it out to businesses that want to expand.

I think we’re having bear market rallies. During the 1930s, the stock market continued to climb but the United States had the largest industrial base in the world, thus the companies listed on the stock exchange had real value. Nowadays, this is not the case. We’re overwhelmingly importers, thus we need consumption to go back up to pre-crash levels in order to get corporate profits back to where they were. The problem is that the only way we can get consumption up is to get people using consumer credit again. Real wages haven’t climbed in 10 years at least, so people aren’t making more money. But there’s already so much debt out there and the banks are so far in the red that there’s really no way to get people into more debt to get consumption back up.

Of course, we could try bringing manufacturing back to this country or at least reducing the burden on businesses to operate here so we can get some more job creation. This would be a real fix to the problem.

At this point, I think the burden on America’s businesses is too large to bring manufacturing back to this country (taxes, minimum wage, OSHA, all kinds of other shit). It would be a lot to undo at this point. [/quote]

Well, that’s the point. Our politicians haven’t figured out a way for us to actually make more money or export more. Wealth is created by making something, selling it to someone else, and spending less than you have and in turn investing that wisely.

45

Ok, sorry to be reporting in so late. I agree with PRCalDude’s assessment that we are in a bear market rally.
One that looks to be getting long in the tooth. It is setting up for some interesting times when the first shoe starts to fall.

Gold hit $1018 today after touching $1020. As I said on the previous page, if it got past $1012 the next stop would be just short of $1030. Could be soon.

The dollar is still slip sliding away. Closed at $76.28. The next level of resistance is not until $74.50. Good ways to go.

I am waiting for one or the other to reverse soon. That should begin the domino effect. Gold starts to fall, dollar starts to climb. Stocks start to fall, oil starts to fall. Houses continue to fall. Commercial real estate joins the game, falling as well. Can anyone name for me this state of conditions? Did someone say DEFLATION.

Either that,or we go through one more down up move before the top and I come out the short term loser and the long term winner (only to myself as the contest will be over.)

46

[quote]JEATON wrote:
Ok, sorry to be reporting in so late. I agree with PRCalDude’s assessment that we are in a bear market rally.
One that looks to be getting long in the tooth. It is setting up for some interesting times when the first shoe starts to fall.
Gold hit $1018 today after touching $1020. As I said on the previous page, if it got past $1012 the next stop would be just short of $1030. Could be soon.

The dollar is still slip sliding away. Closed at $76.28. The next level of resistance is not until $74.50. Good ways to go.

I am waiting for one or the other to reverse soon. That should begin the domino effect. Gold starts to fall, dollar starts to climb. Stocks start to fall, oil starts to fall. Houses continue to fall. Commercial real estate joins the game, falling as well. Can anyone name for me this state of conditions? Did someone say DEFLATION.

Either that,or we go through one more down up move before the top and I come out the short term loser and the long term winner (only to myself as the contest will be over.)
[/quote]

I think the dollar is going to continue to fall, and Gold is going to continue to rise. I will be the short term winner and the long term winner ;).

Edit*

Tho I did mention golds price earlier today, I would like to hold off till Friday before we take a look at how gold did. I will be keeping a week to week update, I just want to make sure it started on Monday at 1005 and some odd change right?

47

I’m going to call this a bit early today, but it looks like for the week the price of gold stayed the same.

48

From last Friday’s close to today’s close, we have virtually a net 0 gain in gold. The dollar is very close, with a minute lose.
It feels as though something is in the air. No idea as how it will play out. Next week should be interesting.

49

[quote]JEATON wrote:
From last Friday’s close to today’s close, we have virtually a net 0 gain in gold. The dollar is very close, with a minute lose.
It feels as though something is in the air. No idea as how it will play out. Next week should be interesting.
[/quote]

Next week should be interesting. but what really has me interested is the next 30 days.

50

Do you smell that, John? '-)
Teasing, but we have decent movement in both the dollar and gold. We’ll see how the day ends.

51

Another good read:

52

Interesting deflation vs. inflation debate with Marc Faber:

http://www.netcastdaily.com/broadcast/fsn2009-0919-3b.asx

53

“Consumers and banks both are suffering from a massive hangover. Their willingness and ability to drink is gone. No matter how many pints of whiskey Bernanke sets in front of someone passed out on the floor, liquor sales will not rise.”

Great quote, and mirrors what both PR and I have been saying.

54

[quote]PRCalDude wrote:
Another good read:

[/quote]

I think this article ignores the possibility that the banks’ reserves far outweigh their losses. If this is the case, their reserves will eventually be loaned and we could still be headed for inflation.

Edited for spelling.

55

[quote]LankyMofo wrote:
PRCalDude wrote:
Another good read:

I think this article ignores the possibility that the banks’ reserves far outweigh their losses. If this is the case, their reserves will eventually be loaned and we could still be headed for inflation.

Edited for spelling.[/quote]

The banks have to convince the public to go further into debt in order to loan the money out. The public has had their fill of debt. Also, given the number of bank failures we’ve seen, I highly doubt that reserves outweigh potential losses.

56

[quote]PRCalDude wrote:
LankyMofo wrote:
PRCalDude wrote:
Another good read:

I think this article ignores the possibility that the banks’ reserves far outweigh their losses. If this is the case, their reserves will eventually be loaned and we could still be headed for inflation.

Edited for spelling.

The banks have to convince the public to go further into debt in order to loan the money out. The public has had their fill of debt. Also, given the number of bank failures we’ve seen, I highly doubt that reserves outweigh potential losses. [/quote]

I believe when consumers regain their confidence in the economy (which, funny enough, is based on what the news tells them, not their actual view of the economy) they will be willing to go further into debt. I do not believe this recession has changed the American public’s opinion of debt for the long term, only temporarily.

As far as which is bigger, reserves or losses, I think it’s anyones guess at this point.

57

[quote]LankyMofo wrote:
PRCalDude wrote:
LankyMofo wrote:
PRCalDude wrote:
Another good read:

I think this article ignores the possibility that the banks’ reserves far outweigh their losses. If this is the case, their reserves will eventually be loaned and we could still be headed for inflation.

Edited for spelling.

The banks have to convince the public to go further into debt in order to loan the money out. The public has had their fill of debt. Also, given the number of bank failures we’ve seen, I highly doubt that reserves outweigh potential losses.

I believe when consumers regain their confidence in the economy (which, funny enough, is based on what the news tells them, not their actual view of the economy) they will be willing to go further into debt. I do not believe this recession has changed the American public’s opinion of debt for the long term, only temporarily.
[/quote]
You might be right, but I think a lot of consumer debtors are smarting from the banking jacking up their rates to %30 overnight and having their credit card debt called in. I think we’ve reached peak debt. Moreover, we haven’t created any private sector jobs in 10 years and we’ll continue to lose them for another 10. We’re having a recoveryless recovery. A lot of people are like the guy above: they’re worried about their jobs and are hoarding cash.

[quote]
As far as which is bigger, reserves or losses, I think it’s anyones guess at this point. [/quote]

The total amount of bad loans written was in the neighborhood of 4 trillion.

58

[quote]PRCalDude wrote:
Another good read:

[/quote]

Thank you for that link. That was a good explanation for what’s going on.

59

[quote]PRCalDude wrote:

As far as which is bigger, reserves or losses, I think it’s anyones guess at this point.

The total amount of bad loans written was in the neighborhood of 4 trillion.

[/quote]

I believe you read more about this than I do but isn’t that still speculation? The banks haven’t written that much off, at least not yet.

Also, probably 80% (don’t ask where I got this number, I basically pulled it out of my ass by considering the decrease in the value of the assets) of that is recoverable through the auction of whatever assets the banks have to secure the loans (houses, mainly). The net 20% loss on $4 trillion (if that turns out to be correct) would be around $800 billion, or basically the same amount as the reserves.

The next couple years will be interesting.

60

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[quote]LankyMofo wrote:
PRCalDude wrote:

As far as which is bigger, reserves or losses, I think it’s anyones guess at this point.

The total amount of bad loans written was in the neighborhood of 4 trillion.

I believe you read more about this than I do but isn’t that still speculation? The banks haven’t written that much off, at least not yet.

Also, probably 80% (don’t ask where I got this number, I basically pulled it out of my ass by considering the decrease in the value of the assets) of that is recoverable through the auction of whatever assets the banks have to secure the loans (houses, mainly). The net 20% loss on $4 trillion (if that turns out to be correct) would be around $800 billion, or basically the same amount as the reserves.

The next couple years will be interesting.[/quote]

Failed Bank List from FDIC:

“Irwin Union Bank, F.S.B. Louisville KY 57068 September 18, 2009 September 22, 2009
Irwin Union Bank and Trust Company Columbus IN 10100 September 18, 2009 September 22, 2009
Venture Bank Lacey WA 22868 September 11, 2009 September 15, 2009
Brickwell Community Bank Woodbury MN 57736 September 11, 2009 September 15, 2009
Corus Bank, N.A. Chicago IL 13693 September 11, 2009 September 15, 2009
First State Bank Flagstaff AZ 34875 September 4, 2009 September 14, 2009
Platinum Community Bank Rolling Meadows IL 35030 September 4, 2009 September 14, 2009
Vantus Bank Sioux City IA 27732 September 4, 2009 September 14, 2009
InBank Oak Forest IL 20203 September 4, 2009 September 14, 2009
First Bank of Kansas City Kansas City MO 25231 September 4, 2009 September 14, 2009
Affinity Bank Ventura CA 27197 August 28, 2009 September 11, 2009
Mainstreet Bank Forest Lake MN 1909 August 28, 2009 September 11, 2009
Bradford Bank Baltimore MD 28312 August 28, 2009 September 11, 2009
Guaranty Bank Austin TX 32618 August 21, 2009 September 4, 2009
CapitalSouth Bank Birmingham AL 22130 August 21, 2009 September 11, 2009
First Coweta Bank Newnan GA 57702 August 21, 2009 September 11, 2009
ebank Atlanta GA 34682 August 21, 2009 August 25, 2009
Community Bank of Nevada Las Vegas NV 34043 August 14, 2009 September 18, 2009
Community Bank of Arizona Phoenix AZ 57645 August 14, 2009 August 19, 2009
Union Bank, National Association Gilbert AZ 34485 August 14, 2009 August 19, 2009…”

This list continues and is huge.

http://www.fdic.gov/bank/individual/failed/banklist.html

The great collapse is upon us. Hope everyone here has their survival farm all set up, in isolated environs.